SEBI Halts Trafiksol ITS Technologies’ IPO: Investors’ Money To Be Refunded

The Securities and Exchange Board of India (SEBI) has put a stop to the Trafiksol IPO. In an order issued on Tuesday, SEBI directed the company to refund the money to investors who had been allotted shares in the IPO. The company has been instructed to approach the market again only after the completion of ongoing regulatory proceedings.

Refund Process to Begin

SEBI’s order, dated December 3, mandates that Trafiksol refund the money to all investors who received shares in the IPO. BSE in coordination with the bankers handling the issue, has been asked to oversee the refund process. This refund is to be completed within one week of the order’s issuance. Once the funds are credited to investors’ accounts, the depositories will transfer the shares allotted in the IPO to a separate demat account registered in the company’s name. Trafiksol is required to cancel those shares thereafter.

Concerns Over Third-Party Vendor

Trafiksol had initially planned to use part of the IPO proceeds to purchase software from a third-party vendor. However, complaints arose when it was revealed that this vendor had not filed financial statements for over 3 years. In September, BSE had instructed the company to defer its listing until certain issues were addressed. SEBI later intervened and ordered further investigations into the vendor’s credibility.

SEBI’s Investigation and Allegations Against Vendor

According to SEBI’s findings, the third-party vendor (TPV) involved in the deal appeared to be a shell company. A site inspection revealed that the TPV’s office was locked, and there were irregularities in its financial statements. These statements, submitted in response to allegations, were signed by an auditor on the same day they were provided to BSE—one day after SEBI intervened to put the listing on hold. Additionally, the vendor’s client list and the credentials of its directors were found to be fabricated. SEBI also discovered that the vendor had been sold for a nominal sum of Rs. 20,000, which further cast doubt on its operational capacity to deliver on the proposed smart city software project.

Trafiksol’s Unconvincing Justifications

In the SEBI order, Ashwani Bhatia, a Whole-time Member of SEBI, noted that Trafiksol had provided multiple, conflicting explanations for its engagement with the TPV. However, the company failed to provide a single credible justification for its actions. The order also referred to Trafiksol’s involvement in a cover-up as its credentials were being scrutinized. Bhatia likened the situation to the saying, “Oh, what a tangled web we weave when first we practice to deceive,” highlighting the deceptive nature of the company’s actions.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.