SME IPO: SEBI directs BSE to put Trafiksol ITS Tech's listing on hold

Trafiksol ITS Technologies Ltd which is based in Noida, had launched its IPO on September 10, 2024, offering a price band of Rs 66 to Rs 70 per share. The issue, managed by Ekadrisht Capital Private Limited, was oversubscribed by 345.65x.

The Securities and Exchange Board of India (SEBI) has on October 11 directed BSE to put the listing of SME entity Trafiksol ITS Technologies on hold while it conducts a detailed probe in the disclosures made by the company in its Draft Red Herring Prospectus (DRHP).

The market debut of Trafiksol ITS Technologies was scheduled on the BSE SME platform on September 17 but got postponed after the exchange intervened and said that the listing has been put on hold until certain complaints/allegations were looked into.

Also read: Trafiksol ITS market debut delayed as BSE intervenes; SME issue saw 345x subscription

The Rs 44.8-crore public offer, purely a fresh issue of 64 lakh shares, was subscribed a massive 345 times.

Meanwhile, SEBI has further directed BSE to ensure that the proceeds from Trafiksol's IPO are placed in an interest-bearing escrow account, with no access granted to Trafiksol ITS Technologies or its affiliates until further orders.

The investigation is to be completed within 30 days from the date of the order, stated the SEBI order issued on Friday

Trafiksol ITS Technologies, which is based in Noida, had launched its IPO on September 10 with a price band of Rs 66 to Rs 70 per share. The issue was managed by Ekadrisht Capital Private Limited.

It has been previously reported that the concerns were regarding a portion of the IPO proceeds (Rs 17.70 crore) that Trafiksol had earmarked for the purchase of an "Integrated Software Control Centre (ICCC)" from a third-party vendor. Post the closure of the issue and allotment of shares, certain complaints were received by both, SEBI and BSE.

According to the SEBI order, the financial statements of the third party Vendor were signed, just a week before the IPO opening. Additionally, the vendor had only obtained its Goods and Services Tax (GST) registration in January 2024, and its business was primarily categorized under "Trade-Retailer" rather than software development.

In response to the allegations, the order noted that the company informed the regulator and BSE that is has now decided to cancel the software procurement plan outlined in its DRHP. Trafiksol further informed BSE that it will seek new proposals from vendors and the contract will be awarded only after shareholder approval.

However, given the company’s previous actions, the SEBI order states that this new plan raises concerns.

"The Company has now proposed to shelve the procurement of software as proposed in the DRHP... However, given the past conduct of the Company, I am constrained to note that the said proposal does not inspire confidence...," stated the SEBI order.