The Securities and Exchange Board of India has cancelled the BSE-SME IPO of Trafiksol ITS Technologies and asked the company to return the funds raised through the IPO to respective investors.

The order came in the wake of a detailed probe conducted by market regulator following reports that the company plans to divert funds raised from IPO.

Trafiksol had hit the capital market between September 10 and 12 and raised ₹44.87 crore and the issue was subscribed over 345.65 times.

Post the closure of the issue and allotment of shares, a complaint was received by SEBI and BSE from Small Investors’ Welfare Association -SIREN alleging that the objects of the aforesaid issue by Trafiksol included purchase of software worth ₹17.70 crore from a vendor who had questionable financials and failed to file its annual financial statements with the Ministry of Corporate Affairs. In view of the complaint, the BSE in consultation with SEBI had deferred the listing of the shares of the company.

Subsequently, the regulator on October 11 passed an ex-parte order, directing itself to undertake a detailed examination into the disclosures made by the SME company. The interim order also directed BSE to maintain the proceeds of the issue in an interest-bearing account till further directions.

Shell entity

Having concluded that vendor as a ‘shell entity’, Ashwani Bhatia, whole-time member directed Trafiksol to refund the money paid by the investors,who have been allotted shares in the IPO. BSE, in co-ordination with the bankers to the issue, should oversee the refund process which shall be completed within one week, the SEBI order said.

Once the money is credited to the bank account of the applicants, the depositories should transfer the shares of the company to a separate demat account opened in the name of the company, which should take appropriate steps for cancelling the shares, the order further said.

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