SEBI bans textile company with zero revenue whose stock rose 1,089%: ‘Absurdity and anomalies'
SEBI uncovered “absurdities” in a textile company's stock moved over 1,000% in two months. The company's director sold crores of shares for $1.
Market regulator SEBI has banned textile company LS Industries and five other entities from the stock market until further orders after it uncovered bizarre movements in the company's stock price. It also found that a former company director sold his entire shareholding worth hundreds of crores for just $1.
In a notice issued on February 11, the SEBI noted that the shares of LS Industries, an Ahmedabad-based company incorporated in 1993 and listed on BSE since 1994, showcased “absurdities and anomalies”.
How the stock moved
Over a two-month period between July 23 and September 27 last year, LS Industries shares rose from ₹22.50 to a high of ₹267.50, an increase of 1,089%. SEBI said that the company's shares then began falling and touched a low of ₹42.39 on November 21, down 84.15%, before increasing again and hitting a high of ₹136.87 on December 23.
Also read: Govt seeks applications for SEBI chief’s post; Congress takes swipe at ad for it
The December 23 high was a 223% rise in the company's share price from the low it hit a month earlier, on November 21.
What is peculiar is that the share price movements were despite the company reporting near-zero revenues and losses going up to ₹8.83 crore over the past three financial years starting FY22.
“Despite such poor health of the financials of LS Industries, its market capitalisation peaked to ₹22,700 crore on September 27, 2024, highlighting the stark disconnect between market capitalisation and the fundamentals of the company,” SEBI said.
Also read: Why YouTuber Asmita Patel, known as ‘she-wolf of stock market’, has been banned by SEBI?
The regulator also pointed out ambitious corporate announcements made by LS Industries between October and December 2024, including “venturing into ‘AI Tech’ industry”, appointment of foreign nationals to its board, incorporation of a foreign subsidiary in Dubai and acquisition of 75% equity in Indian firm Robochef India.
Shares worth crores sold for $1!
At a time when trading of LS Industries' shares was suspended, one of its public shareholder and former director ‘Suet Meng Chay’, holding 12.12% of the company's shares, transferred his entire shareholding to Jahangir Panikkaveettil Perumbarambathu, an NRI residing in Dubai, on October 12, 2022.
The off-market transaction, involving nearly 10.30 crore shares worth at least ₹154.32 crore, was completed for just $1 ( ₹75 based on exchange rates at the time). “It was strange that shares…would be given almost free of cost to some stranger,” SEBI said.
Also read: Six entities pay ₹3.49 crore to settle front-running trade case with Sebi
Apart from Jahangir's share transaction for LS Industries, he has purchased only 48 shares of Jio Financial Services. His KYC documents show that he was working as Administration Manager at Dubai-based Dutch Oriental Mega Yatch. His financial transactions reveal that the money he made by selling LS Industries' shares, when its stock price was manipulated to rise, was remitted to Dubai.
Jahangir still owns shares worth ₹698 crore in LS Industries.
SEBI has ordered a detailed investigation into the matter apart from freezing all bank accounts belonging to Jahangir.