Sebi bars Transgene CMD, 5 other officials from capital market

Sebi today barred six top officials of Transgene Biotek, including its chairman, from the capital market over irregularities in utilisation of Global Depository Receipts (GDRs) proceeds.
The company has been restrained from issuing fresh securities till further orders.
The case relates to USD 29.92 million fund transfer by Transgene to Hong Kong-based Asia First Technologies Ltd, out of its GDR issue proceeds of USD 40.5 million. GDRs are financial instruments used to raise funds overseas.
A preliminary probe by Securities and Exchange Board of India (Sebi) found that the claim by Transgene that it had informed its shareholders about the utilisation of GDR proceeds was "false and misleading".

"The GDR proceeds...Were transferred by Transgene, directly or indirectly, through subsidiary for undisclosed and ulterior purposes under the garb of consideration for technology transfer and for other reasons," Sebi said in an order today.
Accordingly, pending detailed probe in the matter, Sebi has directed Transgene "not to issue equity shares or any other instrument convertible into equity shares or any other security till further orders".

It has also barred Transgene chairman and managing director K Koteswara Rao and five others from the dealing in the securities market, till further directions.
Others officers of the company barred are -- Prashant Kumar Ghosh (director), Soma Sekhar Marthi (director), Narayana Murthy Pentyala (director), K Nirmala Rao (promoter) and K Srinivas (promoter).

According to the market regulator the probe in the case would be "completed expeditiously".
The regulator said that Transgene had "never informed its shareholders that the technology transfer from Asia First to Transgene never took place for which USD 29.92 million were transferred to them from the proceeds of GDRs".
Sebi observed that Transgene and its directors had "deliberately shown a rosy picture to the investors in Indian securities market by making GDR issue and then making false and misleading disclosures about the utilisation of the GDR proceeds".
"Further,prima facie, they actively concealed the fact that the Transgene had never received the technology and other purportedly agreed services from the entities to whom the GDR proceeds were transferred," Sebi said.

On February 22, 2011, Transgene had issued 25 lakh GDRs and issued another 25 lakh GDRs on October 3, 2011, raising a total USD 40.5 million.
These GDR issues were purportedly to raise capital from overseas market for expansion of its present business activities.