SEBI bars Aptech from stock market for 6 months

The Securities and Exchange Board of India (SEBI) has reportedly barred Aptech from the stock market for six months for being found guilty in a Global Depository Receipt (GDR) issue and loan-related fraud, which took place in 2003. Aptech cannot raise any money from the markets, or deal in stocks or derivatives segments during the six-month ban. SEBI has also barred Aptech’s former Managing Director Pramod Khera for five years for violating the Prevention of Fraudulent and Unfair Trade Practices (PFUTP) norms, reported The Hindu BusinessLine. The report adds that Aptech was found guilty of ‘creating a complex maze of agreements’ to show that the GDR issues were fully subscribed even though the loan to subscribe went from the company. The entity, which got the loan and bought GDR, later converted it into equity and sold it in the Indian markets, the report added. The regulatory body, in its investigation, found Aptech pledging its entire GDR proceeds with Banco Bank as a security against the loan availed by another company Willow from Banco Bank for subscribing to Aptech’s GDR. SEBI also found that some of the documents from the 18-year-old case were forged. “Aptech had pledged GDR proceeds to secure the rights of Banco against the loan given to Willow for subscription to GDR and corresponding GDR proceeds was utilised by Aptech only on repayment of loan by Willow,” SEBI found. The company later found using the loan against the GDR proceeds as a security, which was, in turn, the loan taken by Willow to subscribe to the entire quantity of GDR issued by Aptech. The SEBI investigation further revealed that the GDR issued by Aptech to Willow was converted into equity shares and sold in the Indian market. Aptech was also found guilty of not disclosing the interconnecting agreements to the stock exchange. SEBI has further laid charges on Aptech for reporting misleading news to the stock exchange in a distorted manner, which is suspected to have influenced the investor decisions. During the investigation, it was noted that Banco had granted a loan of up to $20,000,000 to Willow by way of a Credit Agreement dated October 20, 2003, for enabling them to subscribe to the GDR issued by Aptech Limited It was also observed that the entire 38,40,000 GDRs were subscribed by only one entity, i.e. Willow, the report added.