SEBI Bars Pacheli Industrial Finance And Six Entities For Financial Irregularities And Stock Manipulation

SEBI Bars Pacheli Industrial Finance And Six Entities For Financial Irregularities And Stock Manipulation

The Securities and Exchange Board of India (SEBI) has barred Pacheli Industrial Finance Ltd (PIFL), a non-banking financial company, and six other entities from accessing or dealing in the securities market until further notice. The action stems from allegations of financial irregularities and stock price manipulation.

In addition to PIFL, the barred entities include Abhijit Trading Company Ltd, Calyx Securities Pvt Ltd, Hibiscus Holdings, Avail Financial Services, Edoptica Retail India, and Sulphur Securities.

According to SEBI’s interim order, PIFL secured loans totaling ₹1,000 crore from these entities, classified as non-promoters. These loans were later converted into equity through a preferential allotment, resulting in the issuance of over 51 crore shares to the lenders. However, investigations into bank account records revealed that the transactions were a sham, with funds being round-tripped between PIFL and the lenders. The company issued shares without receiving genuine consideration.

SEBI's Whole-Time Member Ashwani Bhatia noted that PIFL, which had negligible revenues, suddenly took on massive loans without disclosing their intended use or repayment plans. The preferential allotment enabled the six entities to collectively hold 99.28% of PIFL’s equity, leaving only 0.72% as free float. This led to an artificial spike in PIFL’s market capitalisation from ₹40 crore to over ₹4,000 crore in just eight months, bypassing natural market dynamics.

The regulator flagged the scheme as a potential "pump-and-dump" operation, where inflated stock prices lure retail investors before major shareholders sell off their holdings after the lock-in period.

SEBI has frozen the shareholding of the six preferential allottees and restricted PIFL from accessing the capital markets. The urgency of the action is tied to the lock-in period for the preferential shares, which expires in March 2025, posing risks to retail investors.

Between December 2, 2024, and January 16, 2025, PIFL’s share price surged by 372%, climbing from ₹21.02 to ₹78.2, consistently hitting the 5% upper circuit since December 9, 2024. The regulator highlighted that the company’s share price movement was inconsistent with its financials, triggering internal alerts and prompting the investigation.

SEBI has given the entities 21 days to respond to the findings and will conduct a detailed investigation into the trades executed during the price surge period. The regulator stressed that these measures aim to safeguard investors and uphold market integrity.