SEBI bars nil revenue firm LS Industries, promoter in alleged pump & dump scheme, impounds ₹1.14 crore

The Securities and Exchange Board of India (Sebi) has barred LS Industries – a company with zero revenue but thousands of crores in market capitalisation – its NRI shareholder and four promoter-linked entities from the securities market, and directed impounding of ₹1.14 crore illegal gains made by inflating the company’s stock price.

The trouble started when an ex-director, Suet Meng Chay, transferred a 12 per cent stake—nominally valued at ₹10.28 crore—to an NRI based in Dubai, Jahangir Panikkaveettil Perumbarambathu, for a token amount of just $1. He was supposedly a stranger, who Sebi suspects to be linked to the promoter family through Meta.

This token-dollar transfer set off an alleged pump-and-dump strategy orchestrated through connected entities to artificially inflate the stock price. This enabled the NRI as well as the promoter, and connected entities to sell shares at a higher value, the regulator observed.

A series of early-morning buy orders at the upper circuit limits were seen driving the share price from a low of around ₹22.50 to an astronomical high of ₹267.50 within two months—even though the company’s financials showed negligible revenue and virtually no business activity.

“At the dollar-rupee conversion rate of ₹83.75, this made the purchaser richer by $328.60 million (₹2752 crore) at the company’s peak market capitalization of ₹22,700 crore. The said transaction not only appears to be too good to be true, but also raises the possibility of FEMA violations,” said SEBI’s whole-time member Ashwani Bhatia in the interim order.

Bhatia said that the case painted a picture of “absurdities and anomalies,” and required interim action before another pump and dump takes place and more innocent investors lose money and burn their fingers. He noted that the number of public shareholders has nearly doubled in six months to 6,106 as on December 31, 2024.

“There is a real risk of the noticees off-loading their shares at the cost of investors, who get drawn to the shares of the company seeing high valuations and volumes and would end up getting duped and taken for a ride…Further, action needs to be taken promptly to prevent more money leaving the shores of India through sale of shares by the NRI shareholder,” the order said.

The regulator will be conducting a detailed investigation in the matter by May 15. In the meantime, Sebi has directed the NRI to provide a full inventory of his assets, investments, and bank accounts, as well as freeze any debits in his accounts.