Sebi slaps Rs 10.9 cr fine on seven entities in Teledata Technology GDR manipulation case

Capital markets regulator Sebi has imposed a penalty totalling Rs 10.9 crore on seven entities, including , in a case pertaining to irregularities in the issuance of Global Depository Receipts (GDRs) of the company. Individually, Sebi levied a fine of Rs 10.1 crore on Teledata, Rs 20 lakh each on K Padmanabhan and Arun Panchariya and Rs 10 lakh each on N Sakthivel, M S Ramakrishnan, R Ravichandran and G Jagadish.

In its order passed on Tuesday, Sebi said that Panchariya connived with the other six entities to structure the fraudulent issue of GDRs wherein Teledata suffered a loss to the tune of USD 32.53 million.

The Securities and Exchange Board of India (Sebi) conducted an investigation into the alleged irregularities in the issuance of GDRs by Teledata during the period from February 2010 to March 2010. The focus of investigation was to ascertain whether shares underlying GDRs were issued with proper consideration and whether appropriate disclosures were made by Teledata with respect to its GDRs.

In its probe, Sebi found that the scheme was designed to create an impression of receiving funds through GDR subscription. The total issue size was around 35,37,505 GDRs, through which capital amounting to USD 36.96 million was raised.

This wrong impression was aided by Teledata when it gave misleading disclosures about the subscribers to the issue and suppressed information regarding the pledge conditions of the GDR proceeds pledged with Euram Bank.

The GDR subscription was structured in a manner whereby Panchariya controlled subscriber, Vintage, acquired the GDRs without spending a penny through pledge of the GDRs and GDR proceeds against the loan used for subscription.

“Thus, no funds actually flowed to the company i.e. Teledata until Vintage repaid the loans. While Vintage repaid part of the loan, and funds to that extent did flow to Teledata, Vintage defaulted in its loan obligation to the extent of USD 32.35 million. Hence, Teledata did not get equivalent funds against the equity it had issued, leading to a loss to shareholders of Teledata, whose valuations were diluted by the expanded equity capital,” Sebi noted.

Sebi said these entities were involved in fraudulent and unfair trade practice relating to securities market, thereby contravening the provisions of PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) Regulations.

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