Mumbai: The Securities and Exchange Board of India (SEBI) is expected to unearth new bad surprises soon as its ongoing investigations focus on fraudulent activities, misleading corporate announcements, and stock price manipulation such as price rigging.

Reliable sources on condition of anonymity on Tuesday said the market regulator has reportedly launched an investigation into several individuals, listed companies, promoters, market intermediaries, new influencers, and other institutions on unlawful gains, involving a ‘strategic modes operandi’, principally by artificially inflating share prices despite negligible revenues and poor financial conditions.

Investigations have also been launched into the operations of many private groups as part of the regulator’s ongoing examination and surveillance procedures.

SEBI Bans Himachal Pradesh-Based Company, Its Promoter & Four Others From The Securities Markets

Meanwhile, SEBI on Tuesday banned Himachal Pradesh-based LS Industries Ltd (LSIL), its promoter Profound Finance and four others from the securities markets till further orders following allegations of fraudulent activities and stock price manipulation.

“The company and its promoter devised a scheme in which exdirector of the company, Suet Meng Chay, first transferred 12.12% of the company for just US$1 to Jahangir Panikkaveettil Perumbarambathu (JPP), a Dubai-based NRI. JPP, then entities namely Multiplier Share & Stock Advisors Pvt Ltd., Setu Securities Pvt. Ltd., Paresh Dhirajlal Shah and Ruchira Goyal caused the sudden spike and fall in the share price of the company,” Ashwani Bhatia, whole time member at SEBI said in the interim order.

“Based on a report titled “Mystery of a zero revenue company with Rs 5,500 crore market valuation” published on February 3, 2025, SEBI has been investigating the LSIL case, and as the price movement in the scrip did not appear consistent with the reported financials of the company, the matter was taken up for examination to ascertain whether there was any violation of the provisions of securities laws.

As far as the price movement in LSIL scrip is concerned, SEBI observed that post revocation of suspension of trading in the scrip, the share price moved from Rs 22.50 to a high of Rs 267.50 between July 23, 2024 and September 27, 2024, i.e., an increase of 1089%, almost 11 times within a short span of 2 months. Thereafter, the share price started falling and touched a low of Rs 42.39 on November 21, 2024, a fall of 84.15% from its high. The price again started increasing and within one month rose to Rs 136.87 on December 23, 2024, i.e., an increase of 223% from its recent low of Rs 42.39.

Contrary to all the positive announcements made by the company, when share price touched its high of Rs 267.50 on September 27, 2024, JPP sold some of his shares at Rs 267.50. The trading pattern of JPP also indicated that he sold most of his shares only during the period when there was price rise. SEBI observed that LSIL, its promoter, viz., Profound Finance, JPP, Suresh Goyal, Alka Sahni and Shashi Kant Sahni HUF were part of a manipulative scheme designed to defraud the investors.

SEBI Directs NRI JPP To Impound Unlawful Gains

SEBI has directed NRI JPP to impound unlawful gains of Rs 1.14 crore from the sale of shares as part of a prima facie fraudulent scheme. Suresh Goyal, Alka Sahni, Shashi Kant Sahni HUF and JPP were also prohibited from the securities market by SEBI till further orders. The regulator directed the entities to co-operate with the investigation by furnishing all relevant information.

As the trading pattern in LSIL’s shares was found to be suspicious, SEBI also examined the shareholding pattern of the company. It was noted that on October 12, 2022, the ex-director transferred entire shareholding in an off-market transaction to NRI. At that point of time, trading in the scrip had been suspended since December 30, 2013 and the company was not having any operations.

At the time of suspension of trading in the scrip, i.e., on December 30, 2013, the share price of the company was Rs 15 per share. Accordingly, the shares transferred in off-market to the NRI were worth not less than Rs 154.32 crore calculated at the last available share price of Rs 15. Shockingly, it was noted that the aforesaid off-market transfer took place only at Rs 75 (then US$1) as per the share transfer agreement provided by NSDL. Further, it was also noted that on September 27, 2024 when share price of LSIL touched a high of Rs 267.50, the shares of the NRI that were purchased for US$1 were worth Rs 2,752 crore (10,28,82,050/ Rs 267.50 per share) or US$328.60 million (US$-INR conversion rate 83.75).

The company also consistently reported losses, except for the quarter December 2024, wherein the company reported a profit, on account of ‘other income’. Further, it was also observed that as against negligible revenues reported by LSIL, its balance sheet comprised of huge amounts of trade receivables, its ‘debtor days’ increased from 118 days in FY11 to 58,416 days in FY24 and its cash from operating activities was either NIL or negative from FY16 to FY24. However, despite such poor health of the financials of LSIL, its market capitalisation peaked to Rs 22,700 crore on September 27, 2024, highlighting the stark disconnect between the market capitalization and the fundamentals of the company.

As the financials of LSIL did not seem to explain the dramatic rise in the scrip price, corporate announcements made by LSIL were also analysed by the regulator during the period from July 23, 2024 to February 04, 2025. In its announcement, the company had claimed that it would be venturing into ‘AI Tech’ industry and approval for change of name of the company as “AI Tech Limited” on October 7, 2024.

The trading pattern of the entities involved was found to be suspicious as they placed daily buy orders at 09:00:00 am at upper circuit limits, when there were no sell orders in the scrip which resulted in increase of share price. The regulator analysed the bank statements of JPP and observed that soon after selling his shares, he remitted following funds to Dubai.