The Securities and Exchange Board of India (SEBI) has barred Droneacharya Aerial Innovations Ltd (DAIL), its promoters and key advisers from accessing the securities market for up to two years after an investigation uncovered alleged misuse of IPO proceeds, inflated financials, and misleading corporate disclosures aimed at propping up the company’s share price. Monetary penalties totalling Rs 75 lakh have also been imposed on six entities.
Droneacharya, listed on the BSE SME platform since December 2022, is engaged in drone-training services, drone supply and maintenance, and consultancy operations. SEBI’s investigation, covering FY 2022–23 and FY 2023–24, found that the company and its top management, Managing Director Prateek Srivastava and CFO-director Nikita Srivastava, engaged in practices that “fraudulently induced investor interest” post listing.
According to the order, the company issued misleading and false corporate announcements to generate demand for its shares and arrest a decline in price, enabling pre-IPO investors to exit at favourable valuations. Quasi-Judicial Authority Santosh Shukla in his order noted that, “post listing of IPO of DAIL, made misleading and false corporate announcements to induce interests to buy shares of DAIL to create demand for shares of DAIL and also to maintain the otherwise falling price so that the pre- IPO investors could exit at a better price.”
The regulator found the company deviated from its stated IPO objects without obtaining shareholders’ approval and misrepresented the utilisation of funds in its disclosures. Quasi-Judicial Authority, Santosh Shukla, in his order further stated, “they inflated revenues and profits and artificially maintained the price of the shares of DAIL which enabled the pre-IPO investors to exit at commensurate price, the chances for which, in normal course, were bleak. Further, the IPO proceeds were mis-utilised and they had deviated from the objects clause of the IPO stated in the prospectus and have not taken the shareholders’ approval for the deviation.”
SEBI also highlighted the company’s failure to disclose the quotation for certain software and accessories in the prospectus and found discrepancies in the reporting of deviations in the use of IPO proceeds. “The entire gamut of events shows a classic example of non-genuine and manipulated disclosures, active concealment and fraudulent behaviour within the scope of regulation 2(1) (c) of the PFUTP Regulations. The whole episode shows unwarranted interference in the operation of ordinary market forces and undermines the integrity and efficiency of the markets”, observed the SEBI order, stressing that such conduct undermines market integrity.
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The regulator alleged that Instafin Financial Advisors LLP and its partner Sandeep Ghate played an active role in aiding and abetting the company’s management in the alleged misconduct. Though Instafin and Sandeep Ghate refuted these allegations saying they were at no point involved in the management control or policy making functions of DAIL and never occupied any position on the board of directors. They were not involved in the post IPO corporate announcements, financials of the company or utilization of the funds.
Micro Infratech Pvt Ltd was also implicated for issuing inflated invoices, which facilitated the diversion of IPO funds and misrepresentation of financials. SEBI order noted,” The publicly verifiable costs for GIS software and SQL Server were much lower than the amounts DAIL reported and hence it was a deliberate attempt to misrepresent financial expenditures and misuse of IPO proceeds.”
SEBI has restrained Droneacharya, its promoters, Instafin, Ghate and Micro Infratech from buying, selling or dealing in securities, or being associated with the markets in any form, for periods ranging from one to two years. They have been permitted to close open derivative positions within three months. Additionally, their assets and bank accounts have been restricted from debit transactions, except for payment of penalties.
SEBI order also mentioned the use of popular personalities such as Aamir Khan, Ranbir Kapoor on their website. These celebrities have not given any permission to DAIL for using their images on website.
SEBI order said the conduct “wilful, deliberate and blameworthy”, emphasising that misleading disclosures disturb “the basic tenets of fairness” in the securities market. The noticees have 45 days to pay the monetary penalties.
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