SEBI Orders Investigation into Pacheli Industrial Finance's Jump from Rs40 Crore to Over Rs4000 Crore Company in Just 8 Months
Moneylife Digital Team 16 January 2025
Exposing a modus operandi of Pacheli Industrial Finance Ltd to boost its market-capitalisation to over Rs4,000 crore from Rs40 crore in just eight months, market regulator Securities and Exchange Board of India (SEBI) has ordered a detailed investigation, while barring the company and six other associate entities from markets till further orders. Pacheli Industrial Finance provides consultancy services related to hotels, lodging houses and multiple other services.
 
In an interim order, Ashwani Bhatia, whole-time member (WTM) of SEBI says, "Pacheli Industrial Finance, 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 (noticees 1 to 7) are hereby restrained from buying, selling or dealing in securities, or accessing capital market either directly or indirectly, in any manner whatsoever till further orders. A detailed investigation shall be undertaken by SEBI into the issues identified in this Order, including trades executed in the scrip during the price rise period."
 
 
SEBI says what it witnessed is a company that was consistently reporting negligible revenues and suddenly taking on a Rs1,000 crore loan without making any disclosures on how the funds will be utilised or the loan serviced. "Subsequently, the loan, which appears to have been availed from connected entities, was converted into equity. The examination of the bank statements of Pacheli Industrial Finance and connected entities prima facie revealed that the funds that were advanced as the loan was round-tripped and the company ended up issuing shares without receiving any consideration. By the aforesaid actions, the six preferential allottees ended up holding 99.28% of the expanded share capital of Pacheli Industrial Finance."
 
"By adopting the above modus operandi, Pacheli Industrial Finance's market capitalisation jumped from about Rs40 crore to more than Rs4,000 crore within a period of just over eight months. Apart from the conversion of the fictitious loan into equity, the surge in share price was also fuelled by a minuscule free float - just 0.72% of its shares were available for trading as the remaining 99.28% of shares issued pursuant to the preferential allotment were locked-in. With such a small float, natural market dynamics were effectively bypassed—becoming a case of the tail wagging the dog. The PE ratio of the company has shot up to more than 4,00,000 – a sobering statistic that underscores the gravity of the situation. While it is said that value cannot be conjured from thin air, this scheme comes disconcertingly close," Mr Bhatia, the SEBI WTM, says.
 
Further, SEBI says the trading pattern and share price movement in the Pacheli Industrial Finance scrip appears to indicate that a 'pump and dump' operation may be playing out in the scrip. "The purpose, from all the actions of the management starting with the Rs1,000 crore borrowing and its subsequent prompt conversion to equity, appears to point towards a well thought out plan to build a castle in the air. The price movement witnessed in the scrip also points in this direction. This aspect requires further investigation."
 
Mr Bhatia noted that the number of public shareholders in the company has not seen a significant uptick over the past three months. Further, he says the lock-in pursuant to the preferential allotment expires on 11 March 2025. "Action needs to be taken to ensure that such shares are not offloaded in the open market. Therefore, swift action at this stage can help contain the damage and prevent the wider public from being drawn into the scrip—stopping the charade before it takes centre stage," he added.
 
Based on internal alerts, SEBI investigated the share price of movement of Pacheli Industrial Finance which did not appear consistent with the company's reported financials. Between 2 December 2024 and 16 January 2025, the share price of PIFL moved from Rs21.02 to Rs78.2 —an increase of 372% in just over a month. Notably, the company, which is under additional surveillance measure (ASM) stage 4, has also been hitting the 5% upper circuit every day since 9 December 2024. 
 
Pacheli Industrial Finance did not record any operating income in FY21-22 and FY22-23. Further, its operating revenue of Rs1.07 crore reported in FY23-24 was driven by bad debt recovery of Rs0.44 crore and interest income from loans of Rs0.63 crore. Consequently, the company's price-to-earnings (P/E) ratio moved to 4,05,664 as of 16 January 2024 —an extraordinarily steep valuation showing an apparent disconnect between the share price and fundamentals of the company, SEBI says.
 
Comments
vspraoo
3 weeks ago
Exactly same thing happening in Gujarat Toolroom company. No revenue. No profits. Books cooked up. Fake profits total employee cost just 28 lakhs per year and company boasts of mega projects. 25 rupees share price. Five to one bonus issue
Shameful that regulator wakes up only when everyone is trapped. Promoter sold off entire stake long ago. Moneylife should investigate this please
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