Sebi has barred Birla Pacific Medspa Ltd, Yashovardhan Birla and eight others from the securities market for two years for mis-utilisation of the IPO proceeds.
Birla Pacific Medspa Ltd (BPML), which came out with offer documents in March 2011, had floated its over Rs 65-core initial public offering (IPO) in June 2011.
The regulator found that the company made misstatements in the prospectus in respect of the objects of the IPO.
While around 75 per cent of the IPO proceeds were promised to be utilised in setting up of Evolve Medspa centres under the 'objects of the issue' in the prospectus, no such centres ultimately have been set up, Sebi said.
Similarly, while 15 such centres were promised to be set up by the end of March 2012, but not even a single centre was set up by that time, it added.
On the contrary, Sebi said, 50 per cent of the IPO proceeds or Rs 31.54 crore were deployed as inter-corporate deposits (ICDs) to group companies, out of which 60 per cent of ICD's were never returned to the company.
This was in stark contrast to the objects of the IPO or the interim use of funds as stated in the prospectus.
The prospectus permitted the interim deployment of proceeds as an investment in liquid instruments only and did not permit such deployment of funds as ICDs.
"The fact that funds of IPO proceeds would be deployed as ICDs to group companies of BPML as against the setting up of Evolve Centers was never disclosed in the prospectus. In fact, the prospectus never contemplated that funds would be deployed as ICDs to group companies within five days from the receipt of IPO proceeds without any event of exigency," Sebi noted.
The statements in the prospectus relating to 'objects of the issue' and 'interim use of funds' were untrue and inadequate on material terms, Sebi said in an order passed on Friday.
Through such acts, the entities violated the provisions of ICDR (Issue of Capital and Disclosure Requirements) Regulations.
Accordingly, Sebi has barred the company, Yashovardhan Birla and eight other individuals from accessing the securities market and further prohibited them from buying, selling or otherwise dealing in securities for two years, while one individual has been prohibited from the capital markets for six months.
These individuals were the signatories to the prospectus of Birla Pacific Medspa, the order noted.