The Securities and Exchange Board of India (Sebi) on Tuesday barred textile firm LS Industries from the securities market for alleged stock price manipulation and fraudulent practices. The markets regulator noted that LS Industries had a market capitalisation of Rs 22,700 crore at the peak.
LS Industries, despite having a market capitalisation of Rs 5,768 crore, reported minimal revenue in the past three fiscal years. An investigation by Sebi revealed that in October 2022, former director Suet Meng Chay transferred his entire 12.12% stake in the company to Dubai-based NRI Jehangir Panikkaveettil Perumbarambathu in an off-market deal, news reports stated.
Although the shares transferred were valued at approximately Rs 154 crore based on a share price of Rs 15 each, the transaction took place at a significantly lower price of Rs 75 or $1 per share. Sebi’s inquiry uncovered suspicious buy orders placed by multiple entities at the upper circuit limits at 9 am, leading to a significant increase in the share price. These actions resulted in an 11-fold increase in the share price within a short span of two months.
The regulatory body has issued a temporary order prohibiting LS Industries Ltd (LSIL), along with its promoters and key individuals, from engaging in the trading of its shares and participating in the securities market until further notice, due to allegations of manipulating stock prices.
This action follows an investigation by SEBI into LSIL, a textile company that has reported minimal revenue. Despite recording no sales in two quarters of FY25, LSIL’s stock price experienced a significant surge from Rs 22.50 in July 2024 to Rs 267.50 in September—an increase of 11 times—before plummeting to Rs 42.39 in November.
SEBI’s investigations uncovered a suspected pump-and-dump scheme involving a group of traders, including Multiplier Share & Stock Advisors Pvt. Ltd. and Setu Securities Pvt. Ltd. These entities were found to have placed buy orders at upper circuit limits early on, leading to an artificial inflation of the stock’s price. Subsequently, they proceeded to dump shares, resulting in a significant drop in the stock’s value.
The Sebi is set to conduct a thorough investigation by May 15. Meanwhile, Sebi has instructed the NRI to furnish a comprehensive list of his assets, investments, and bank accounts, as well as to freeze any withdrawals from his accounts.