Sebi bars PG Electroplast’s four promoter-directors for fund diversion

Market regulator Sebi on Tuesday barred PG Electroplast and its four promoter-directors from dealing in the capital market for 10 years after they were found guilty of diverting funds and indulging in manipulative activities during a public offer in 2011. According to the Securities and Exchange Board of India (Sebi), a probe revealed that PG Electroplast had suppressed material facts in its IPO prospectus as well as siphoning off and diverting the IPO proceeds for the purpose of purchasing its own shares. In its final order passed on Tuesday, Sebi barred the firm and its promoter-directors — Anurag Gupta, Vishal Gupta and Vikas Gupta — from dealing in the capital markets for 10 years. It has prohibited the entities from raising any capital from the securities market for 10 years. PG Electroplast had failed to disclose information in the prospectus regarding funds raised through ICDs (inter corporate deposits), purchased orders placed for plant and machinery and that repayment of ICDs would be made from IPO proceeds. It had also diverted the IPO proceeds to entities who had purchased its shares, among others. Accordingly, the company has also been directed to take “urgent and effective measures to recover all the money recoverable on account of investments in ICDs, contracts for purchase of land, etc, which have not fructified till now.” The company will have to report the progress on the same by May 10, 2014, on the basis of which further directions would be considered by Sebi, the order said. “It cannot be a coincidence that such fraudulent activity had its origin prior to the IPO of PG Electroplast and resulted in the siphoning off and diversion of proceeds of that IPO,” Sebi said in the order. “The violations of law observed with respect to PGEL and its promoter directors, if not dealt with sternly, could give rise to situation where raising of capital would become extremely difficult even for honest companies,” it noted. PG Electroplast IPO had opened on September 7, 2011 and closed on September 12, 2011. Sebi had initiated a probe after it had noticed that the firm’s share-price fluctuated within few days of its listing. Pending probe into the matter, the market regulator in December 2011 had restricted the firms and its promoters from dealing in securities as well as raising capital from the stock markets till further orders.