Sebi bars LS Industries, promoters for alleged stock manipulation

Cautions investors against 'blind pursuit' in companies without strong fundamentals

Textile firm LS Industries, which reported negligible revenue over the last three financial years despite enjoying a market capitalisation of Rs 5,768 crore, was on Tuesday barred by market regulator along with its promoter and four others from the securities market for alleged stock price manipulation and fraudulent practices

 

The Securities and Exchange Board of India (Sebi) said that LS Industries had a market capitalisation of Rs 22,700 crore at the peak.

 

Sebi’s probe showed that in October 2022, an ex-director of the company, Suet Meng Chay transferred the entire holding of 12.12 per cent stake in the company in an off-market transaction to Jehangir Panikkaveettil Perumbarambathu, a Dubai-based NRI.

 

While the shares transferred in the off-market were worth nearly Rs 154 crore at the share price of Rs 15 apiece, the transfer took place only at Rs 75 or $1.

 

Sebi’s findings showed suspicious buy orders placed by several entities at 9 am at the upper circuit limits resulting in increase in the share price. Such practices pushed the price 11 times within a short period of two months.

 

When the stock price was at its peak of Rs 267.5 in September, Jehangir sold some of the shares. The trading pattern showed that he sold most of his shares only during the period when there was a price rise.

 

Following the surge, the scrip started hitting lower circuits daily owing to sell orders at lower circuits placed by the very same entities involved in the positive push.

 

The market watchdog has alleged manipulation by the promoters who were connected to Jehangir to defraud the investors.

 

Out of 10.28 crore shares which Jehangir received for $1, he sold a fraction of the shares, 1.06 lakh and made Rs 1.14 crore profit. Sebi has directed impounding of this illegal gain and barred Jehangir from the markets.

 

The market regulator said that it needed to act before another “pump and dump” could happen and more investors lose money.

 

“Investors in blind pursuit of profit through investment in a company without any fundamentals are like children following the proverbial pied-piper of Hamelin. Markets can be generous at times but cannot be so generous to give outlandish gains,” noted Sebi whole-time member Ashwani Bhatia in the interim order.

 

Sebi has also alleged the possibility of violations of the FEMA norms. The regulator will be concluding the investigation in the matter by May 15.