Trafiksol IPO: SAT Upheld SEBI’s Decision to Repay Investors’ Money

The Securities Appellate Tribunal (SAT) has upheld the order issued by the capital market regulator against the SME company Trafiksol ITS Technologies, directing it to refund investors money following its successful initial public offering (IPO).

SAT Decision on Trafiksol’s appeal

In a ruling issued on Tuesday, the appellate authority rejected the appeal filed by the company, stating that there was no merit in the case. It also affirmed that the Securities and Exchange Board of India (SEBI) had the authority to suspend the company’s listing and mandate the refund of all investor funds from the public issue.

The tribunal’s decision also criticized Trafiksol ITS Technologies for having “little regard for disclosure norms” and for disregarding the concerns of public shareholders, concluding that allowing the IPO to proceed at this stage would serve no beneficial public purpose.

Appeal by Trafiksol

Trafiksol’s appeal argued that the show cause notice issued by SEBI did not indicate that the IPO could be halted, claiming such an action went beyond the scope of the investigation.

On December 3, SEBI halted Trafiksol’s IPO and ordered a refund to investors following a probe prompted by a complaint about improper use of the issue proceeds and misleading disclosures.

In its draft red herring prospectus, Trafiksol had stated it planned to purchase an Integrated Software Control Centre (ICCC) from a third-party vendor to serve as the operational core for smart cities. However, after receiving concerns regarding the vendor’s viability, SEBI instructed BSE to investigate, which uncovered various issues.

SEBI’s order revealed that the third-party vendor appeared to be a shell company, and Trafiksol had provided inconsistent and conflicting explanations regarding its relationship with the vendor. The company failed to offer any credible justification for its actions. Despite these issues, the company’s IPO had been a major success, oversubscribed by 345%, with the listing scheduled for September 17 on the BSE.

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