SEBI bans company after "absurdities" uncovered, $1 share purchase of NRI investor soars to $329 million!

SEBI reiterated the need for investors to check financials of a company before investing, to not be the children who followed the proverbial pied-piper of Hamelin

A one dollar purchase of shares soared to Rs 2,752 crores and even to Rs 22,700 crore at its peak, in an odd case being investigated by SEBI. The case involved 1993 incorporated LS Industries that has been reporting even zero revenue in two quarters of FY25!

In an interim order cum showcause notice issued on February 11, the Securities and Exchange Board of India (SEBI)'s Whole-time Member Ashwani Bhatia wrote that the case was a picture of "absurdities and anomalies" and that there was a need to act fast before a pump-and-dump scheme is done and innocent investors lose their money. Unexplained surges and falls in the share price has been noticed over the past year, even though the financials of the company were abysmal and the price movement did not correspond with corporate announcements.

Also read: SEBI bans company that has been listed for barely a year and its directors from the market

Bhatia also commented on the baffling transfer done by the company's former director Suet Meng Chay to a a Dubai-based Jahangir Panikkaveettil Perumbarambathu (JPP). The WTM noted that this transfer could "raise possibilities of FEMA violations" and that there was a need for the regulator to act before money leaves shores of India through sale of shares by the NRI shareholder JPP.

SEBI has banned the company, JPP and four other connected entities from the market till further orders. An unlawful gain of Rs 1.14 crore that JPP seems to have made by selling the shares in the market has also been impounded.

Weird transfer
The investigation showed how Suet Meng Chay transferred shares nominally worth Rs 10.28 crore to JPP, whose KYC documents showed him to be an administration officer and employee of Dutch Oriental Mega Yatch LLC, Dubai, for just one dollar, and then the value of these shares soared in value to these absurd numbers within two years.

All the while, with the company reporting a little over Rs 40 lakh in revenue and net losses, and even zero revenue in FY25.

JPP was later found to be connected to LS Industries' through his Facebook network. Here's how: The promoter of LS Industries, M/s Profound Finance Pvt. Ltd., is owned by Dharam Pal Goel and Ramesh Chander. Sudesh Goel is wife of Dharam Pal Goel and she is family member of Ramesh Chander. She is also sister of one Om Prakash, who is father of Ashish Garg. Ashish Garg is a facebook friend of Mr. JPP

In the order Bhatia issued a word of caution for investors, "It is noted that the investors at times act in a manner bereft of any caution or rationale. Investors in blind pursuit of profit through investment in a company without any fundamentals are like children following the proverbial pied-piper of Hamelin. Markets can be generous at times but cannot be so generous to give outlandish gains. In a market where unscrupulous elements seem to be casting their net wide by indulging in various manipulative practices, the investors must not allow the lure of easy profits get the better of them."

Odd price movement

SEBI acted quickly after being alerted to the company's oddities by an article titled “Mystery of A Zero Revenue Company With Rs. 5500 Crore Market Valuation” published in NDTV Profit on February 3, 2025. As the SEBI order stated, a quick check showed that "something was amiss" in the share-price movement.

The order said, "It was observed that post revocation of suspension of trading in the scrip of LSIL, 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% within a period of just over two 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."

Other red flags

Besides weak financials and strange share transfers, the regulator also flagged other concerns involving the other noticees in the order. These noticees, Suresh Goyal, Alka Sahni and Shashi Kant Sahni HUF, are relatives of a company that LS Industries was to acquire called Robochef.

As the order noted, after LS Industries declared its intention to acquire Robochef, these relatives used that opportunity to dump shares of LS Industries and made "windfall gains". The order said, "Such pattern of trading definitely raises concern regarding more mischief happening behind the scene."