India regulator bars two over Dhenu Buildcon fabricated loan scheme, inflated market value
India’s markets regulator on Wednesday barred two individuals linked to Dhenu Buildcon Infra from the securities market for allegedly orchestrating a fabricated-loans scheme that inflated the company’s market value more than 1,600-fold.
The Securities and Exchange Board of India said in its interim order that 250 million rupees ($2.61 million) was repeatedly circulated through bank accounts of connected entities owned or controlled by the identified individuals, Surendra Kumar Jain and Virendra Jain, to simulate 10 billion rupees in loans.
The regulator said the non-banking financial company purportedly obtained the simulated money from seven entities, including Golkonda Aluminium Extrusions and Tiaan Consumer, and converted 8.40 billion rupees of the debt into equity through a preferential allotment to six of them.
The regulator found that the entities involved were directly or indirectly owned, controlled or managed by the two men, and were linked through common addresses, directors, authorised signatories and cross-shareholdings.
SEBI also barred Dhenu Buildcon from undertaking any corporate actions, including bonus issues, rights issues or dividend payments.
Driven by the “fabricated” loan-to-equity conversion, Dhenu Buildcon’s market capitalisation jumped to 49.25 billion rupees from 30 million rupees, despite negligible changes in the company’s revenue or profitability, SEBI said.
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