Coming down heavily on IKF Technologies Ltd, its two officials and Clifford Capital Partners AG SA for manipulating the issuance of global depository receipts (GDR), markets regulator Sebi has slapped a total fine of Rs 15.1 crore on the firm.
During the course of investigation, Sebi noted that IKF Technologies had come up with GDR issues on two occasions–on March 30, 2007 and May 15, 2009– amounting to $ 11 million and $ 10.98 million respectively, accoding to Sebi order passed on June 24.
In this regard, Pan Asia Advisors was the book running lead manager for both of GDR issues of IKF. Arun Panchariya was the founder, director as well as 100 per cent shareholder of Pan Asia.
It was found that the complete process of GDR issuances by IKF was devised and structured by Panchariya in connivance with IKF to the detriment of Indian investors wherein loans were arranged for the subscription of GDRs of IKF on both the occasions, on the first occasion by Clifford Capital Partners AG SA (erstwhile Seazun Ltd) and on the second occasion by Vintage FZE, the order said.
Panchariya was also the managing director, 100 per cent shareholder and authorized signatory of Vintage.
For this, IKF and its directors, in connivance with entities connected to Panchariya as well as Clifford Capital Partners (CCP), had executed the scheme of fraudulent issuance of GDR wherein they had issued GDRs on two different occasions and pledged the GDR proceeds once with Banco Efisa SFE SA bank and on another occasion with European American Investment Bank AG (EURAM) Bank so that CCP and Vintage could take loan for the subscription of GDRs.
Thereafter, using certain foreign institutional investors, he got the GDRs converted into underlying shares and sold them in the Indian securities market with the help of certain domestic entities connected to him.
Whole Time Director of IKF, Sunil Kumar Goel and its director Mukesh Kumar Goel were also a part of the fraudulent scheme, according to Sebi order.
Besides, the firm had made false and misleading corporate announcements pertaining to GDR issues. IKF also failed to furnish the sought information and thereby hampered the investigation of Sebi.
For violating market norms in the process, Sebi in an order passed on June 24, levied a total fine of Rs 12.1 crore on IKF Technologies and Rs 1 crore fine each on two officials and CCP.
In a separate order passed on Thursday, Sebi levied a total penalty of Rs 10.25 crore on Beckons Industries Ltd in a matter related to manipulation in issuance of GDR.
The order follows an investigation conducted by Sebi between June 1, 2010 and June 30, 2010 to ascertain whether shares underlying GDRs issued by firm were issued with proper consideration and whether appropriate disclosures were made.
The Sebi order said that Beckons had issued the GDRs in a fraudulent way by way of credit agreement and account charge agreement, which was not disclosed to the exchanges and also made misleading disclosures.
The entire GDRs amounting to $ 10.54 million were subscribed by only one entity, Vintage, on obtaining a loan from EURAM Bank.
The company acted as guarantor and deposited the entire GDR proceeds with EURAM Bank as security against the loan for subscribing to the GDRs issued by the company.