SEBI investigates finance company over alleged stock manipulation and preferential allotment scheme | Representative Image
The market regulator SEBI has restrained Pacheli Industrial Finance (PIFL) and six other entities from accessing the securities market until further orders noting that the role of the company’s statutory auditor GSA and Associates LLP needs further investigation for building “castles in the air” indicating a pump-and-dump operation in their stock.
In an interim order issued on Thursday (January 16), the Securities and Exchange Board of India (SEBI) highlighted PIFL providing consultancy services related to hotels, lodging houses and other multiple services, and the six other entities were under scrutiny for orchestrating a preferential allotment to benefit a few at the expense of other shareholders.
The share price of PIFL moved from Rs 21.02 to Rs 78.2 —an increase of 372 percent in just over a month – between December 02, 2024 and January 16, 2025 after the market regulator’s surveillance system picked up the price movement in the company’s stock which did not appear to be consistent with the company’s reported financials.
The market watchdog probe revealed that the company had taken a loan of Rs 1,000 crore from six entities, without revealing the purpose of the loan and financing cost, later converted into equity through preferential allotment. “the money raised through this loan was then forwarded to other entities that were connected to the lender entities and that the funds were finally routed back to these lender entities. the company ended up issuing shares without receiving any consideration,” reported the SEBI probe.
The SEBI Whole-time Member Ashwani Bhatia noted that all actions of the company’s management pointed towards a “well-thought out plan to build a castle in the air” and “the preferential allotment appears to have been part of a well orchestrated effort to expand the share capital of the Company and allot shares to ‘connected’ entities without receiving any consideration, at the cost of the existing public investors”.
The order observed that “prima facie” it appeared that the company’s statutory auditor GSA and Associates LLP may have been acting in concert with the management and that the auditor’s role needs further investigation.
“Situations like the one at hand raise fundamental questions about SEBI’s role as the securities market regulator, statutorily mandated to safeguard the interest of the investors,” states the SEBI order adding that a more proactive approach may sometimes be required to protect the interests of the investors and maintain investor confidence.
