In a significant regulatory intervention, the Securities and Exchange Board of India (SEBI) has barred Himachal Pradesh-based LS Industries, its promoter Profound Finance, and four others from participating in the securities market amid allegations of stock price manipulation and fraudulent activities. The regulator has also ordered the impounding of INR 1.14 crore in unlawful gains from a Dubai-based shareholder involved in the scheme.
The probe uncovered a sophisticated price-rigging operation, where LS Industries’ share price surged despite negligible revenue and financial instability. SEBI’s order, issued on Tuesday, detailed how former director Suet Meng Chay transferred a 12.12% stake to Jahangir Panikkaveettil Perumbarambathu (JPP) for a mere $1. JPP later offloaded shares at peak prices, capitalizing on a stock price rally driven by misleading market announcements.
The regulator observed suspicious trading patterns, particularly between July and September and November to December last year. During this time, JPP selectively sold shares, reaping a significant profit. SEBI’s scrutiny of bank statements revealed that JPP quickly moved the proceeds offshore. Despite selling only a fraction of his holdings, he continues to hold 10.27 crore shares, currently valued at a staggering INR 698 crore.
LS Industries’ meteoric stock rise—peaking at INR 267.50 in September—defied financial logic. At its highest market capitalization of INR 22,700 crore, JPP’s holdings would have translated to a windfall of over INR 2,752 crore ($328.6 million), raising concerns of possible violations under FEMA regulations. SEBI’s probe has also flagged LS Industries’ proposed acquisition of Robochef, suspecting that insiders strategically dumped shares before the deal announcement.
The regulator’s interim action aims to prevent further damage to retail investors, as the number of public shareholders ballooned from 3,892 in June to 6,106 in December—many lured by the stock’s artificial rally. A media report had earlier highlighted LS Industries’ inflated INR 5,500 crore valuation despite having zero revenue, triggering SEBI’s preliminary investigation.
Image Source: InvestingPro+
While LS Industries’ stock surged to dizzying levels, InvestingPro’s fair value feature provides a clear picture and a hint of stock manipulation. The fair value of LS Industries comes in at INR 35.9 per share, indicating a potential downside of 41.5% from its current market price of INR 61.3. This means investors who buy at current levels may be significantly overpaying, let alone those who bought it at INR 200+ levels..
InvestingPro’s fair value feature leverages multiple financial models to determine a realistic valuation for a company, helping investors steer clear of overpriced stocks. Given the regulatory concerns surrounding LS Industries, relying on data-backed valuation tools like InvestingPro can be crucial for making informed decisions.
To help investors gain a clear edge, InvestingPro is currently offering discounts of up to 45% for a limited time. Now is the perfect time to subscribe and access data-driven valuations to avoid costly mistakes in unpredictable market conditions.
Read More: This Midcap Stock Selection Strategy Has Given 54% CAGR since 2019
X (formerly, Twitter) - Aayush Khanna
LinkedIn - Aayush Khanna