After that, the Indian stock market watchdog stepped in.
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On Tuesday, the Securities and Exchange Commission of India (SEBI) suspended trading in LS Industries Ltd (LSIL) after revealing a clear discrepancy between financial health and the burgeoning stock price. The move follows a similar crackdown by Pacheli Industrial Finance Ltd (PIFL), which also ignored its financial logic.
This study highlights the changing approach of Sebi. This doesn’t just respond to inventory crashes. The regulator is currently leaning towards advanced surveillance tools and third-party financial data platforms to identify red flags before retail investors suffer losses.
Mint contacted SEBI, PIFL and LS Industries for comments on regulatory actions, but is still receiving responses.
What warned SEBI to businesses?
Sebi’s investigation into LSIL was triggered by a February 3rd article on NDTV profits. £5,500 crores. LSIL shares were suspended from trading by the exchange between December 30, 2023 and July 2024 due to violations of SEBI regulations.
Following reviews, regulators found that more than 1,000% rose sharply between August and September 2024 on just 48 trading days after the suspension was lifted. Over the past month, LSIL stocks have fallen 20.98% and are currently trading £64.56.
In the case of PIFL, internal monitoring warnings flagged irregularities as the company’s stocks have consistently reached the limits of the upper circuit, prompting concerns about possible price manipulation since December 2024. This is a mechanism under BSE’s additional monitoring measures and is designed to monitor high-risk inventory.
What are the similarities between the two studies?
In both cases, SEBI intervened after an unexplained stock price surge despite the weak financials of the company. Neither LS Industries nor Pacheli Industrial Finance had any meaningful operating income in the last three fiscal years, but their valuations have skyrocketed.
What set these studies apart was Sebi’s change in approach. Rather than relying solely on internal monitoring alerts, regulators rely on external financial data platform Screener.in to verify inconsistencies and demonstrate deviations from normal methods.
By leveraging third-party data, Sebi was able to identify a broader pattern of stocks that exhibit similar price inflation that is not unbacked by the basis. “This enhanced vigilance is potentially disruptive for companies with questionable business models, but is generally considered positive for investors,” said Sanjay Israeli, a partner at Desai & Diwanji. I stated.
He added that Sebi has historically intervened only after investors suffered losses. “Now, Sebi uses advanced monitoring tools to detect problems out of control and prevent market manipulation rather than simply responding.”
What did Sebi Probe discover in LSIL?
Sebi’s investigation into LSIL reveals companies that shouldn’t have been worth it with all traditional metrics £At peak time it was 22,700 crores.
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The company has neglected revenues and has not reported material purchases or material costs from FY22 to FY25, suggesting a lack of actual business activities.
Since 2016, cash from operations has been either negative or ignored. The “Debtor’s Day” from the 118th of 2011 to the surprising 58,416th of 2024 has been expanding, indicating a serious liquidity problem.
The stock price rose 1,089% between July and September 2024, but it plunged by 84% before rebounding 223% in December 2024, suggesting adjusted price manipulation.
Sebi’s probes have now been zeroed at Multiplier Share & Stock Advisors Ltd, Paresh Dhirajlal Shah and Ruchira Goyal. They are said to have placed large buy orders to raise prices before dumping stocks.
Mint reached out to the multiplier for comment but has not yet received a response.
Further scrutiny revealed an out-of-market stock transfer in October 2022. Former director Suet Meng Chae has transferred 12.12% of LSIL’s capital (around the market price) to Dubai-based Jahangir Panikkaveettil Perumbarambathu (JPP). JPP has no known history of significant securities investments and has raised a red flag about its relationship with promoters.
By February 2025, JPP still holds the value of its stock £698 crores, no clear wealth or transaction history to justify such exposure. The Sebi probe also revealed the familial link between the JPP and the LSIL promoter, raising questions about the privately-relevant party transactions.
What did Sebi discover in PIFL?
PIFL’s finances were similarly tough.
Company’s £1.07 Revenue for fiscal year 2014 came from near-complete debt collection and interest income, not business operations.
Nevertheless, its inventory surged by over 370% between December 2024 and January 2025, expanding its price (P/E) ratio of over 400,000.
The management change in 2023 saw a rapid increase in approved share capital and a set of preferred allocations, ultimately focusing 99.28% of the company’s capital on just six investors.
Sebi found that loans that appear to have been filed through preferential allocations are recycled in a circular pattern across multiple entities, suggesting that the company has never actually received these funds. Masu. This concludes the regulatory authority concludes that the transaction is part of a scheme that artificially increases the market capitalization of PIFL.
What actions did Sebi take?
Sebi has determined that these actions are likely to violate the SEBI Act and PFUTP regulations. Furthermore, JPP’s trading patterns and significant profits have raised concerns about potential FEMA violations, money laundering and illegal financial transfers.
As a result, Sebi has frozen trades on LSIL and PIFL stocks, with key entities blocking trading and shocks £1.14 crore on suspicion of illegal profit from JPP’s stock sales. It also freezes corporate banks and demat accounts to effectively prevent further stock dilutions or asset transfers.
Regulators have explicitly warned investors after blindly following stock market trends, likening them to “children following the proverb Piper Piper.”
Industry experts believe regulators’ actions can set a precedent for tighter surveillance of thinly traded stocks with questionable finances.
Little & Co. According to Zubin Morris, a partner at the company, “The use of screener apps and advanced monitoring mechanisms have flagged an extraordinary surge in PIFL prices.
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“By leveraging tools such as AI, data analytics, and integrated monitoring systems (ISS), SEBI is currently suitable for insider trading in pump and dump schemes or spotting financial fraud,” Morris said. I added.
