Sebi orders recovery of diverted IPO money by Onelife

Company raised a total amount of Rs 36.85 crore through this IPO in September 2011

In a first of its kind order, Sebi today asked financial services firm Onelife Capital Advisors Ltd and its chief to refund over Rs 35 crore, which was raised through an IPO but fraudulently diverted to other entities, within six months to the company.

An investigation conducted by Sebi into deployment of funds raised through this Initial Public Offer (IPO) found that the company had diverted Rs 35.25 crore worth of proceeds to three entities for purposes other than those stated as the objects of the IPO.

The company had raised a total amount of Rs 36.85 crore through this IPO in September 2011.

In a 54-page order, Sebi asked Onelife and its Managing Director Pandoo P Naig to bring back Rs 35.25 crore, the diverted IPO proceeds, into the company from Fincare, Precise and KPT within six months. Both of them have also been barred from from dealing in securities markets, directly or indirectly, for a period of three years.

Onelife's five directors -- T K P Naig, D C Parikh, A P Shukla, T S Raghavan and T Shirdharani-- have also been barred from taking up any assignments as directors in any company for a period of one year, Sebi said in its order.

Sebi directed Onelife's board to ensure compliance of direction and submit a monthly progress report regarding it.

Further, the company's board would also need to furnish a compliance report certified by a Sebi-registered merchant banker within two weeks of compliance of this direction.

The Sebi probe in the case involved review of documents filed with the Ministry of Corporate Affairs, income tax returns and annual returns, the facts observed during on-site visit, bank statements, among others.

The IPO opened for subscription on September 28, 2011 and closed on October 04, 2011 and was over-subscribed by 1.53 times, despite being graded '1' on a scale of 1-5, indicating poor fundamentals. The shares were listed on October 17, 2011.

Preliminary investigations revealed that Onelife had made mis-statements in the offer documents and had utilised the IPO proceeds for purposes other than the objectives of the share sale as stated in the Red Herring Prospectus (RHP).

The company had also sought to settle the case through Sebi's consent settlement process, but the request was rejected by the regulator earlier this month.

 In its submissions before Sebi, Onelife denied any wrongdoing and claimed that regulator had "no jurisdiction to enquire into or pass any directions in respect of alleged diversion or siphoning of funds".

Sebi, however, rejected these claims and found violations on various fronts including those related to disclosures in IPO documents, mis-statements, listing agreements, as also to relevant clauses of the Sebi Act and the Prevention of Fraudulent and Unfair Trade Practices Regulations.

The company had also claimed that investors did not lose any money in the IPO and the shares had traded significantly above the issue price for almost two years.