Market regulator Securities and Exchange Board of India (SEBI) has ordered a detailed and time-bound examination of the disclosures made by Trafiksol ITS Technologies Ltd (Trafiksol) in its draft red herring prospectus (DRHP) filed with the Bombay Stock Exchange (BSE) on 30 May 2024, including other issues. SEBI also directed BSE not to proceed with the listing of Trafiksol shares.
In
an order last week, Ashwani Bhatia, whole-time member (WTM) of SEBI says, "BSE shall take appropriate steps to ensure that the proceeds from the initial public offering (IPO) of Trafiksol are placed in an interest-bearing escrow account, and no access to these funds shall be granted to Trafiksol or its affiliates until further orders. The investigation shall be completed within 30 days from the date of this order.”
Last month, BSE decided to halt listing Trafiksol shares, citing some unresolved queries. The Rs44.87 crore IPO of TrafikSol on the small and medium enterprise (SME) platform received nearly 350 times subscriptions or bids worth around Rs19,380 crore.
Noida, Uttar Pradesh-based TrafikSol was scheduled for a listing on 17 September 2024 on BSE in the list of 'MT' group of securities. However, several investors have raised concerns about the company's fundamentals, balance sheet, auditors' resignations and use of proceeds from the IPO.
Consequent to the postponement of the listing, SEBI started receiving complaints from investors who had been allotted shares in the IPO. The investors primarily requested the cancellation of the IPO and refund of their investments.
Separately, the market regulator, also called Ekadrisht Capital Pvt Ltd, the sole book-running lead manager to the TrafikSol issue, to clarify issues raised in complaints it received. However, Ekadrisht Capital was not able to provide satisfactory responses, SEBI says.
Several investors raised concerns about TrafikSol's purchase of software for Rs17.70 crore from Oasis Corpcare Pvt Ltd which has a paid-up capital of just Rs1 lakh and has not filed any reports since 2021.

In its investigation, BSE found that the financial statements of Oasis Corpcare for the past three years were signed by Murmuria & Associates on 2 September 2024, a week before the opening of the IPO of TrafikSol. During its site inspection, BSE found that the office of Oasis Corpcare was closed and that no one was available at the company address.
SEBI also observed that the audited financials did not have a unique document identification number (UDIN) which is mandatory for financial documents and certificates attested by practising chartered accountants (CAs).
Oasis Corpcare obtained registration for goods and services tax (GST) only on 5 January 2024 and mentioned its nature of business as a trade-retailer and retail business. "It, therefore, prima facie, appears that the third-party vendor is not a software developer," SEBI says.
While proposing to shelve the procurement of software from Oasis Corpcare as stated in the DRHP, TrafilSol informed BSE that it would call for fresh proposals from vendors and award the contract only after obtaining the consent of shareholders.
Mr Bhatia, the WTM of SEBI, says, "...it cannot be ruled out at this stage that the attempt to award the software contract to a vendor, who prima facie appears to be a shell entity without any prior experience in developing a software platform of the nature disclosed by TrafikSol in its DRHP, was an attempt to deliberately mislead investors and divert the IPO proceeds."
He also noted that investments made by the individuals and entities who have been allotted shares in the IPO are in limbo or at risk and the listing of these shares will provide immediate liquidity to such investors.
However, the WTM says, "...if such IPOs are allowed to list, even in the wake of such serious concerns, it can shake the confidence of the investors in the listed SME ecosystem."
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