Trafiksol ITS Technologies' initial public offering (IPO) has been canceled by the Securities and Exchange Board of India (SEBI), which has also directed the business to return the money it received from the offering. The BSE had already suspended the SME IPO while it conducted a probe.

Trafiksol might see a new offering after SEBI's ongoing processes are concluded, according to the SEBI's 16-page order released on Tuesday.  The market watchdog has ordered that investors receive a fair return on their investment.

"Trafiksol is directed to refund the money paid by the investors, who have been allotted shares in the Initial Public Offering," the Securities and Exchange Commission said.

In its ruling, Ashwani Bhatia, a Sebi longtime member, said:

a) Investors who purchased shares in the initial public offering are required to receive their money back from Trafiksol.

b) In the case of Trafiksol ITS Technologies Ltd., the refund procedure will be supervised by the BSE in collaboration with the issue bankers and must be finished within a week of the date of this order. Investors will receive a proportionate repayment of the interest earned on the issue proceeds in accordance with the guidelines in the interim order.

c) The depositories are instructed to move the company shares that were distributed in accordance with the IPO to a different demat account created in the company's name as soon as the funds are credited to the applicants' bank accounts.

d) The Company is instructed to take the necessary actions to cancel the shares that the depositories have transferred to the aforementioned account.

IPO listing of Trafiksol Halted

After SIREN and the Small Investors' Welfare Association complained to SEBI and the BSE, the issue's listing was postponed till September 17.

According to the accusations, the issue's goals were to buy software from a dubious-looking vendor who had neglected to submit yearly financial accounts to the Ministry of Corporate Affairs for a total of Rs 17.70 crore.

In order to act as the main operational hub for smart cities, Trafiksol has said in its DRHP that it intends to buy an Integrated Software Control Centre (ICCC) from a third-party vendor.

But once questions were raised concerning this vendor's integrity, SEBI asked BSE to look into it. BSE has since brought up a number of concerns about the problem.

The BSE and SEBI agreed to postpone the shares' listing in response to the complaint.

\On October 11, the SEBI issued an interim order directing a probe into the situation. 

Additionally, the Interim Order instructed BSE to retain the issue's proceeds in an interest-bearing account pending further directives. On November 11, a report was sent in after the investigation.

According to the SEBI's 16-page judgment published on Tuesday, the third-party vendor (TPV) may be a shell firm after an inspection.

In the order, Sebi stated that it is fair to conclude that the TPV in question is a'shell entity'. The TPV's office was discovered closed during a site inspection, and its financial statements for FY22 to FY24, presented in response to complaints, were obtained under dubious circumstances because they were signed by the auditor on the same day they were submitted to BSE by the MB. And this came one day after the BSE, in cooperation with SEBI, suspended the listing of the company's shares and launched an investigation. Furthermore, the customer list and credentials of its directors, as stated in its profile, were falsified. The ex-director's sworn statement that the company was sold for Rs 20,000 supports the conclusion that the TPV lacked the technical ability and operational capacity to carry out a difficult project like ICCC software."

In the ruling, Bhatia stated that Trafiksol had provided several and contradicting explanations for its involvement with the TPV, but the business "failed to provide a single credible justification" for this.

Bhatia stated, "The question of whether the TPV quotation was part of a conspiracy to divert IPO proceeds will be moot due to the circumstances precipitated by the Complaint and subsequent regulatory intervention. This, however, does not change the fact that the Company used a sham business and participated in a cover-up when the TPV's credentials were being investigated."