NRI investor turns $1 into $328M; SEBI intervenes
What's the story
The Securities and Exchange Board of India (SEBI) has slapped a trading ban on Himachal Pradesh-based LS Industries, its promoter Profound Finance, and four other entities.
The move comes after allegations of fraudulent activities and stock price manipulation.
The center of this controversy is Dubai-based NRI investor Jahangir Panikkaveettil Perumbarambathu (JPP), who made a killing by selling part of his shares in LS Industries.
Investment details
Initial acquisition and subsequent profit
SEBI's interim order revealed JPP first bought 10.28 crore shares of LS Industries for a mere $1.
Despite the company's negligible revenue, his remaining stake is now worth ₹698 crore as of February 10, 2025, following a massive price spike.
The investment is now worth a staggering $328.6 million at the company's peak valuation, prompting fears of possible Foreign Exchange Management Act (FEMA) violations.
Regulatory scrutiny
SEBI investigates alleged stock price manipulation
SEBI has observed that LS Industries and its key associates artificially boosted the company's share price despite dismal financials.
Former company director Suet Meng Chay had transferred a 12.12% share to JPP for just $1, which later skyrocketed in value.
The regulator's probe found that JPP's trading activity coincided with two major price rise periods between July-September and November-December, raising questions about coordinated trading patterns.
Market manipulation
Warning against potential pump-and-dump scheme
Ashwani Bhatia, a senior official at SEBI, has indicated that LS Industries, Profound Finance, and JPP may be running a manipulative scheme to cheat investors.
"There is a need to act before another pump-and-dump scheme causes harm to innocent investors," Bhatia warned.
The case has attracted more attention since LS Industries announced a planned acquisition of Robochef.
Acquisition concerns
SEBI raises concerns over Robochef directors' relatives
SEBI has raised concerns that relatives of Robochef's directors, such as Suresh Goyal, Alka Sahni, and Shashi Kant Sahni, sold stocks during the price surge and made huge gains.
The regulator's preliminary examination was initiated after media reports on LS Industries's ₹5,500 crore valuation despite zero revenue.
SEBI is now conducting a deeper investigation into possible violations of PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) and LODR (Listing Obligation and Disclosure Requirements) norms.