SAT upholds Sebi order against SME firm Trafiksol ITS Technologies

Regulator had directed refund of money to IPO investors

The Securities Appellate Tribunal (SAT) on Friday upheld an order passed by the Securities and Exchange Board of India (Sebi) against Trafiksol ITS Technologies, a traffic solution provider.

 

In December, the market regulator directed Trafiksol to refund the money to investors who had been allotted shares in its initial public offering (IPO).

 

The Rs 45-crore IPO of Trafiksol was set to be listed on BSE’s Small and Medium Enterprise (SME) platform in September 2024 but was halted after complaints regarding the use of issue proceeds and wrongful disclosures.

 

The issue had garnered over 345 times oversubscription.

 

Sebi had issued an ex-parte order on the company in October 2024, after which a detailed investigation was carried out.

 

In the December order, Sebi highlighted the dubious nature of the third-party vendor from which Trafiksol was to purchase software utilising nearly 40 per cent of the issue proceeds. Sebi concluded that the third-party vendor was a shell entity and alleged that the company attempted to cover up when the vendor’s credentials were examined.

 

Sebi’s initial investigation revealed that the third-party vendor had not filed financial statements with the Ministry of Corporate Affairs for more than three years and had no revenue in the last year for which financials were filed.

 

Additionally, the vendor’s financial statements for the previous three years were signed on the same day, just a few days before the listing. The vendor’s registered office was found closed, and its GST return did not match the disclosed business undertaken.