Capital markets regulator Sebi has imposed a fine totaling Rs 10.9 crore on seven entities including Teledata Technology Solutions Ltd in a case over irregularities in the company’s issuance of Global Certificates of Deposit (GDR).
Individually, Sebi fined Rs 10.1 crore on Teledata, Rs 20 lakh each on K Padmanabhan and Arun Panchariya and Rs 10 lakh each on N Sakthivel, MS Ramakrishnan, R Ravichandran and G Jagadish.
In its order issued on Tuesday, Sebi said Panchariya colluded with the other six entities to structure the fraudulent GDR show in which Teledata suffered a loss to the tune of $32.53 million.
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The Securities and Exchange Board of India (Sebi) conducted an investigation into the alleged irregularities in the issuance of GDRs by Teledata during the period February 2010 to March 2010. The objective of the investigation was to determine whether the shares underlying the GDRs had been issued with due consideration. and whether appropriate disclosures have been made by Teledata with respect to its GDRs.
In his investigation, Sebi discovered that the scheme was designed to give the appearance of receiving funds through a GDR subscription. The total issue size was approximately 35,37,505 GDRs, through which capital in the amount of $36.96 million was raised.
This false impression was aided by Teledata when it provided misleading information about subscribers to the issue and removed information regarding the terms of pledging the GDR product pledged to Euram Bank.
The GDR subscription was structured so that the Panchariya-controlled subscriber, Vintage, acquired the GDRs without spending a dime through the pledge of the GDRs and the proceeds of the GDR against the loan used for the subscription. .
“So no funds were actually paid to the company, i.e. Teledata, until Vintage repaid the loans. Although Vintage repaid part of the loan and, to that extent, the funds were paid to Teledata, Vintage defaulted on its loan obligation in the amount of USD 32.35 million. Consequently, Teledata did not obtain funds equivalent to the equity it had issued, resulting in a loss for Teledata shareholders, whose valuations were diluted by the increase in share capital,” Sebi noted. .
Sebi stated that these entities were involved in fraudulent and unfair trading practices relating to the securities market, thereby contravening the provisions of the PFUTP (Prohibition of Fraudulent and Unfair Trading Practices) Regulations.