Siphoning of IPO proceeds: Sebi bans Austral Coke, 4 others from securities market for 6 months

The present directors of the company have been asked to take appropriate steps for the compliance of this direction by the company.

(Pic: Freepik)

Sebi on Monday barred Austral Coke and Projects Ltd (now known as Greenearth Resources and Projects Ltd) and four others from the securities market for six months in a case pertaining to siphoning off the company's IPO proceeds to a promoter group entity.

Also, the company has been directed to take the measures to bring back Rs 29.42 crore of the proceeds of IPO (initial public offering) within one year, according to a Sebi order.

The present directors of the company have been asked to take appropriate steps for the compliance of this direction by the company.

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Apart from Austral Coke, others prohibited by Sebi are -- Ratan Lal Tamakhuwala, Rishi Raj Agarwal, S K Chowdhary, and Rajendra Kumar Khaitan.

They have been "restrained from accessing the securities market and further prohibited from buying, selling or otherwise dealing in securities, directly or indirectly, or being associated with the securities market in any manner, whatsoever, for a period of six months... Or till the direction of bringing back or recovering Rs 29.42 crore of the proceeds of IPO... Is complied with".

It was alleged that the utilisation of funds as shown by the company in the quarterly results under the erstwhile listing agreement for the three quarters ended September 30, 2008, December 31, 2008 have been misstated.

Further, it was alleged that a part of the IPO proceeds has been siphoned off to a promoter group entity Anarcon.

Sebi noted that Rs 52.08 crore out of the IPO proceeds were transferred to six entities controlled by Ajit Kumar Jindal for supply and setting up of LAM Coke Plant, out of which Rs 29.42 crore were transferred to Anarcon Resources Pvt Ltd -- a promoter group entity of Austral Coke.

"... Transfer of Rs 29.42 crore out of these funds to promoter group entity Anarcon, as evidenced by the bank account statements amounts to misutilisation of IPO proceeds," Sebi said in its 76-page order.

Further, the fact that Rs 29.42 crore of proceeds of the IPO were ultimately transferred to Anarcon establishes that IPO proceeds to this extent were siphoned off, it added.

Through these acts, Austral Coke has violated the provisions of PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) rules.

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Austral Coke came out with an IPO in August 2008. The shares of the company are listed on BSE and NSE.

Earlier, Sebi had received reference from the Income Tax Department and complaints from investors in 2009, informing the regulator that the books of accounts of the company have been manipulated and several misstatements in the prospectus of the company have been made with an intent to mislead the investors.

These mis-statements were related to company's coke production capacity and the disassociation of promoters from another company -- Gujarat NRE Coke Limited.

In view of this, an interim order was passed against Austral Coke in September 2009 that prohibited it from raising any further capital in any manner, directly or indirectly, till further directions.

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