The Securities and Exchange Board of India (Sebi) has sought to punish three merchant banks, including Punjab National Bank's merchant banking arm, and seven recently-listed firms and their promoters, accusing them of misusing IPO proceeds, performing shoddy due-diligence process, and aiding promoters to prop up prices on listing day.

These firms and their promoters have been barred from the securities market while the bankers have been prohibited from taking up any new merchant banking assignments. The seven firms include Bharatiya Global Infomedia, Tijaria Polypipes, Taksheel Solutions, RDB Rasayans, Onelife Capital Advisors, Brooks Laboratories and PG Electroplast.

Almondz Global Securities and Atherstone Capital are the two other bankers besides PNB Investment Services that have been barred.

The market regulator, in five separate orders on Wednesday evening, said some of these recently-listed companies diverted IPO funds to related entities via inter-corporate deposits (ICDs) to drive up volumes on listing. It has directed these entities to bring back the funds diverted through various routes.

In the case of Taksheel Solutions, Sebi said the company made various inaccurate statements in the offer document and siphoned off part of the proceeds to certain stock market operators, which were the top net buyers in the stock on listing day. Taksheel shares, which were issued at 150 apiece, touched a high of 185 before falling to close at 38.50. Sebi barred Taksheel's banker, PNB Investment Services, and its MD & CEO LP Agarwal from carrying out further merchant banking activity.

The regulator also barred PG Electroplast from raising any fresh capital from the market and prohibited its directors from dealing in securities.

Brokerage Almondz Global Securities, which handled PG Electroplast's IPO; Vinay Mehta, managing director & CEO of Almondz; and Sanjay Dewan (authorised signatory to Almondz for the due-diligence certificate) have been told not to take up any new merchant banking assignments.

DIVERSION OF IPO MONEY

Sebi said PG Electroplast diverted a 'predominant portion' of the IPO proceeds for operations in equity markets, 'questionable' land deals and raw material purchases, leading to suspicion that the issue was siphoning off funds.

It said a lot of the fund diversion happened through ICDs and this money was used by entities to create 'artificial' volumes on listing day. "The funds provided to these buyers (of stock on listing day) were diverted from the proceeds of the IPO. Further, the company and its directors have siphoned off money from the company to certain entities in the form of advance for purchase of land etc," Sebi whole-time member Prashant Saran said in a 76-page order.

In the case of Onelife Capital Advisors, Sebi barred Atherstone Capital Markets Managing Director Gurunath Mudlapur and Ranjan Agarawal (compliance officer) from being involved in any fund-raising activity.