Description

SEBI issues confirmatory order restraining Pacheli Industrial Finance Limited and 6 preferential allottees from accessing capital markets following 372% abnormal price rise despite negligible revenues and fundamental disconnect.

Summary

SEBI issued a Confirmatory Order under sections 11(1), 11(4) and 11B of the SEBI Act against Pacheli Industrial Finance Limited (PIFL) and six preferential allottees, restraining them from buying, selling or dealing in securities or accessing capital markets. The action follows an abnormal 372% price increase (from INR 21.02 to INR 78.2) between December 2, 2024 and January 16, 2025, despite the company reporting negligible revenues and a P/E ratio of 4,05,664, indicating severe disconnect between share price and fundamentals. The stock was under ASM Stage 4 surveillance and hitting 5% upper circuit daily since December 9, 2024.

Key Points

  • PIFL share price surged 372% in just over one month (December 2, 2024 to January 16, 2025) from INR 21.02 to INR 78.2
  • Market capitalization reached INR 4,057 crore as on January 16, 2025
  • Stock was under Additional Surveillance Measure (ASM) Stage 4 and hitting 5% upper circuit daily since December 9, 2024
  • Company reported zero operating income in FY 2021-22 and FY 2022-23
  • FY 2023-24 operating revenue of only INR 1.07 crore driven by bad debt recovery (INR 0.44 crore) and interest income (INR 0.63 crore)
  • P/E ratio reached extraordinarily steep 4,05,664 as on January 16, 2024
  • Interim Order dated January 16, 2025 restrained 7 entities from accessing capital markets
  • Direction issued for detailed investigation into the matter
  • Noticees include PIFL and 6 preferential allottees: Abhijit Trading Company Ltd, Calyx Securities Pvt. Ltd, Hibiscus Holdings Pvt. Ltd, Avail Financial Services Ltd, Edoptica Retail India Ltd, and Sulphur Securities Pvt. Ltd

Regulatory Changes

No new regulatory framework changes. This is an enforcement action applying existing provisions under sections 11(1), 11(4) and 11B of the SEBI Act, 1992.

Compliance Requirements

  • All 7 noticees (PIFL and 6 preferential allottees) are restrained from buying, selling or dealing in securities
  • All 7 noticees are prohibited from accessing the capital market in any manner
  • Entities must comply with directions pending detailed investigation

Important Dates

  • December 2, 2024: Start of abnormal price rise period (share price INR 21.02)
  • December 9, 2024: Stock began hitting 5% upper circuit daily
  • January 16, 2025: Interim Order issued; share price reached INR 78.2; market cap INR 4,057 crore
  • May 23, 2023: Change in management - Paras Nath Verma appointed as Managing Director, promoter director Pankaj Padamchand Dhoot resigned
  • June 30, 2023: Promoters requested reclassification to ‘public’ category
  • September 2, 2023: Statutory Auditor Shyam C Agarwal & Co. resigned

Impact Assessment

Market Impact: Severe - The 372% abnormal price rise with daily upper circuits created artificial market activity in PIFL scrip. The extreme P/E ratio of 4,05,664 represents complete disconnection from company fundamentals, potentially misleading retail investors. Market capitalization inflated to INR 4,057 crore despite negligible business operations.

Operational Impact: Complete capital market freeze for all 7 noticees prevents any securities transactions or market access. This impacts PIFL’s ability to raise capital and all preferential allottees’ market activities.

Investor Impact: High risk to investors who purchased shares during the manipulation period. The stark contrast between share price performance and actual business fundamentals (zero revenue in two consecutive years, minimal revenue in third year) indicates potential investor losses.

Regulatory Impact: Case demonstrates SEBI’s surveillance mechanisms detecting price-fundamental anomalies. ASM Stage 4 classification and subsequent enforcement action reflect regulatory focus on protecting market integrity. Detailed investigation directed to uncover complete manipulation mechanism.

Impact Justification

High severity enforcement action involving market manipulation with 372% abnormal price rise, complete capital market access ban on company and 6 entities, P/E ratio of 4,05,664 indicating severe fundamental disconnect, and ongoing detailed investigation.