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In an unprecedented measure, BSE postponed the listing of Trafiksol ITS Technologies on Tuesday after investor concerns about the company's fundamentals, balance sheet and use of issue proceeds.
The company's Rs 45-crore IPO had garnered bids worth over Rs 10,000 crore.
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“In view of certain queries that have been raised, the listing for trading of the scrip is postponed till queries are resolved by the issuer,” said BSE in a circular on Tuesday.
Sources said that the BSE acted on a complaint filed with the Securities and Exchange Board of India (Sebi), the market regulator, against the small and medium-sized enterprise (SME) IPO.
Trafiksol, an information technology services company for traffic systems and industries, came out with a maiden share sale worth almost Rs 45 crore at a price band of Rs 66 to Rs 70 per share. The issue was open for subscription between September 10 and September 12. The issue received over 300 times subscription from investors.
Some participants had raised questions on frequent resignations by auditors, using a significant portion of proceeds of the funds for purchasing software from a dubious company, sudden exponential surge in the share capital in FY23 compared to the previous two financial years through bonus issues in private placement, and exceptional rise in profits in FY24, just before the filing for IPO.
Industry players said that in such instances an exchange ban the use of funds and the funds raised during the IPO subscription period are kept in an escrow account until the issues are resolved.
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Though no timeline is prescribed, the exchange can give an option of refund to the investors who have been allotted money if they find issues with the IPO, said a regulatory expert.
"The decision gives a strong message to the exchanges, auditors and the ecosystem that they need to look at the balance sheets and governance of the companies raising money from the public," said a regulatory official.
The decision by the exchange comes at a time when Sebi has warned investors of SME IPOs and called for higher scrutiny by the bourses and auditors.
The market regulator is also working on a consultation paper to tighten the norms around SME listings following instances of fraudulent practices by promoters and gross violations of the securities norms.
The market regulator may formulate norms on disclosure requirements, eligibility conditions, portions reserved for qualified institutional buyers (QIBs) and anchor investors, and audit related scrutiny.
The exchanges have also taken steps to filter out SMEs with poor revenues and profits with recent changes in eligibility and have also imposed a 90 per cent cap on listing gains to avoid astronomical rises.
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