Sebi bars Valecha Engineering from capital markets; stock falls 15%

Mumbai: Shares of infrastructure company Valecha Engineering Ltd fell as much as 15% on Wednesday after the capital markets regulator Securities Exchange Board of India (Sebi) banned the company and its promoters from the raising capital from public for three years with immediate effect. The stock touched a low of Rs.45.20—a level last seen on 29 September 2015.

In a late evening order on Tuesday, Sebi found the firm and its promoters guilty of violating provisions of the Prohibition of Fraudulent and Unfair Trade Practices regulations. The ruling came after an investigation into the trading of Valecha Engineering shares between 1 January 2009 to and 31 December, 2009.

The probe also revealed violations in the preferential allotment of warrants in 2005. “Prior to and also after the preferential allotment, substantial funds were transferred from VEL to the ‘preferential allottees’ through several ‘connected entities’ (who were noted to be inter se connected amongst themselves on the basis of inter se fund transfers, common directors, etc. and also with VEL, preferential allottees on the basis fund transfer, shareholding, promoter, etc.) and then back to VEL,” said the Sebi order.

“Later during 2009, substantial non-genuine trading in the scrip amongst the said ‘connected entities’, ‘preferential allottees’ and the certain other entities connected/ related to VEL and its MD, Mr. Jagdish Valecha was observed,” the order added.

The order said that 14 entities including Valecha Engineering would be restricted from raising capital from the public for the next three years. It also prohibits these entities from “buying, selling or otherwise dealing in securities, directly or indirectly, in any manner, whatsoever, for the period..”

Valecha Engineering reported a standalone net loss of Rs.40.18 crore in the September quarter as compared to a net loss of Rs.4.58 crore a year ago. The company has reported a net loss for six consecutive quarters. As of March 2015, the company had a total consolidated debt of Rs.982.49 crore. Debt figures as of the September ended quarter are not available.

Valecha Engineering shares hit an all-time high of Rs.204.65 in January 2008 and have fallen 75% since then. At 10.41am, Valecha Engineering was trading at Rs.47.60 on BSE, down 11.11% from previous close while India’s benchmark Sensex Index fell 0.03% to 25,572.71 points.