Description

SEBI issues confirmatory order restraining Pacheli Industrial Finance Limited and six preferential allottees from accessing capital markets following suspicious 372% price surge despite negligible revenues.

Summary

SEBI has issued a confirmatory order under sections 11 and 11B of the SEBI Act, 1992, restraining Pacheli Industrial Finance Limited (PIFL) and six preferential allottees from buying, selling, or dealing in securities or accessing capital markets. The action follows an abnormal 372% share price surge (from INR 21.02 to INR 78.2) between December 2, 2024 and January 16, 2025, despite the company reporting negligible revenues and fundamentals that do not justify the valuation.

Key Points

  • PIFL share price increased 372% in just over one month (December 2, 2024 to January 16, 2025)
  • Share price was hitting 5% upper circuit daily since December 9, 2024
  • Market capitalization reached INR 4,057 crore as of January 16, 2025
  • Company reported zero operating income in FY 2021-22 and FY 2022-23
  • Operating revenue of only INR 1.07 crore in FY 2023-24 (driven by bad debt recovery and interest income)
  • Price-to-Earnings (P/E) ratio reached extraordinarily high 4,05,664
  • Company was under Additional Surveillance Measure (ASM) Stage 4
  • Seven entities restrained: PIFL and six preferential allottees (Abhijit Trading Company Ltd, Calyx Securities Pvt. Ltd, Hibiscus Holdings Pvt. Ltd, Avail Financial Services Ltd, Edoptica Retail India Ltd, Sulphur Securities Pvt. Ltd)
  • SEBI directed detailed investigation into the matter

Regulatory Changes

Interim order dated January 16, 2025 imposed immediate restraints on the noticees. This confirmatory order upholds those restrictions under SEBI Act sections 11(1), 11(4), and 11B.

Compliance Requirements

  • Pacheli Industrial Finance Limited and six preferential allottees are prohibited from:
    • Buying, selling or dealing in securities
    • Accessing capital markets in any manner
  • All seven entities must comply with SEBI’s investigation requirements
  • Trading members and market participants must enforce the trading restrictions on these entities

Important Dates

  • December 2, 2024: Share price at INR 21.02 (start of abnormal price movement)
  • December 9, 2024: Stock began hitting 5% upper circuit daily
  • January 16, 2025: Interim order issued; share price reached INR 78.2; market cap at INR 4,057 crore
  • May 23, 2023: Management change - Paras Nath Verma appointed as Managing Director; promoter director resigned
  • June 30, 2023: Promoters requested reclassification to ‘public’ category
  • September 2, 2023: Statutory auditor resigned

Impact Assessment

Market Impact: High - The trading ban affects a company with INR 4,057 crore market capitalization and prevents seven entities from market access. Investors holding PIFL shares face liquidity constraints and potential losses.

Compliance Impact: This case highlights SEBI’s active surveillance mechanisms for detecting price manipulation and its willingness to take swift enforcement action. The extreme disconnect between fundamentals (minimal revenue) and valuation (P/E of 4,05,664) demonstrates the type of anomalies that trigger regulatory intervention.

Operational Impact: The company’s business is effectively frozen regarding capital market activities. The involvement of six preferential allottees suggests potential coordinated activity under investigation. The case serves as a warning against artificial price inflation schemes.

Impact Justification

SEBI enforcement action involving trading ban on company and promoters due to suspected market manipulation with abnormal price movement (372% surge) disconnected from fundamentals (P/E ratio of 4,05,664)