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

As the SEBI order noted, the lock-in period of a large part of the promoter shareholding was ending soon, so there was a need to act quickly to protect investors.

The market regulator has banned Kalahridhaan Trendz Ltd (KTL), which has been listed for less than a year on NSE SME platform, and its directors from accessing the securities market until futher orders. KTL has been listed on the platform only since February 23, 2024.

Through an interim cum showcause notice issued on February 10, the Securities and Exchange Board of India (SEBI) issued directions to company its managing director Niranjan D Agarwal, whole-time director Aditya Agarwal and non-executive director Sunitadevi Niranjan Agarwal. Prima facie findings showed that the company failed to make material disclosures regarding a default in repayment of its dues, made false and misleading corporate announcements and tried to cover its tracks by providing fabricated email communications.

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In the order, SEBI's Whole-time Member Ashwani Bhatia stated, "The false and misleading corporate announcements positively affected the price and trading volume in the scrip. It appears that the Company had made the said corporate announcements to paint a rosy picture of the prospects of the Company and to induce investors to trade in the shares of the Company. By acting in such manner, the Company has indulged in fraudulent and unfair trade practices in the securities market."

He also stated that there was a need to urgently act in the matter because the one-year lock-in for promoters would be expiring around February 23, 2025. Since, prima facie findings suggest that corporate announcements made by the company were false and misleading and were apparently aimed to induce investors to trade in the share of the company, "there is a real possibility that the promoters... may start selling their shares and exit the Company, leaving gullible investors in the lurch".

Also, the company has approved another fund-raising through rights issue.

As Bhatia noted, "There is a risk that if further fund raising is not stopped the public shareholders, lured by the false and misleading corporate announcements made by the Company in the recent past, may be tempted to invest further in the Company and suffer losses in the long run".