Sebi orders Onelife to cough up Rs 35 cr for IPO diversion

This is the first case where the market regulator has probed the fraudulent diversion of proceeds from an IPO, calls it a market-related fraud

GN Bureau | September 1, 2013



In an unprecedented move, market watchdog Securities and Exchange Bureau of India (Sebi) has directed financial services firm Onelife Capital Advisors Limited and its managing director to refund over Rs 35 crore raised through an initial public offer (IPO) but was illegally diverted to various other entities.

According to an order issued by the regulator, the company and its chief have been asked to refund Rs 35.25 crore that they had raised through an IPO in September 2011 and had fraudulently diverted to three other firms: Fincare, Precise and KPT.

“Onelife Capital Advisors Ltd and its managing director, Pandoo P Naig, shall, jointly and severally, bring Rs 35.25 crores – i.e. the diverted IPO proceeds – into the company from Fincare, Precise and KPT within six months from the date of this order,” said the 54-page order released by SEBI on Friday.

Further, the company and its MD have also been barred from and prohibited from “accessing the securities market and also prohibited from buying, selling and otherwise dealing in securities market, directly or indirectly, in whatsoever manner,” till December 2014, the order said.

Investigations by SEBI revealed that following the IPO of 33.5 lakh equity shares worth Rs 36.85 crore in September 2011, the company used the proceeds for purposes different from those mentioned in its red herring prospectus (A preliminary registration statement that must be filed, describing a new issue of stock and the prospects of the issuing company). It was also discovered that the company had made wrongful statements in the offer documents, necessitating the probe.

The company argued that investors did not lose out any money as the shares traded at prices higher than the issue price and sought settlement of the case through the regulator’s consent settlement process. However, the request was rejected by the regulator and the order was issued on Friday.

This is the first of various IPOs that the regulator has been probing and it pointed in its release that such fraudulent diversion of IPO proceeds as a securities market-related fraud.

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