SEBI Bans SME Firm Kalahridhaan Trendz Within A Year Of Listing For 'Misleading Investors'

The Securities and Exchange Board of India on Monday banned Kalahridhaan Trendz Ltd. from accessing the securities market for "misleading" investors. The regulatory action against the small and medium enterprise comes within a year of its listing on Feb. 23, 2024.

SEBI has also barred Kalahridhaan's Managing Director Niranjan D Agarwal and two others from the securities market.

The SME firm, which is involved in fabric manufacturing, came under radar after the market regulator received complaints against it from HDFC Bank with regards to defaults in paying credit card dues. SEBI subsequently launched an investigation against the company. The examination period was from Feb. 23, 2024 to Dec. 15, 2024.

Despite the issue of loan defaults being raised by SEBI and the National Stock Exchange, Kalahridhaan did not make necessary disclosures about the same. The regulator further discovered that the company had made expansion claims that did not seem credible.

"Despite claims of planning to expand production capacity to 7 Lakh meters per month and anticipating a 25% profit increase, the company failed to provide specific details of contracts or orders which could justify the announcement," the SEBI order read.

SEBI also observed that essential information regarding the expansion plan, such as the timeline and required investment, had not been made.

"The announcement appeared to be vague, lacking tangible evidence supporting the announcement and aimed at misleading the investors by portraying a rosy picture of the company," it further said.

The order, issued by SEBI's Whole-Time Member Ashwani Bhatia who has constantly warned investors regarding SME IPOs, further mentioned that the one-year lock-in period of the company's promoters is slated to end of Feb. 23, 2025, and they might be looking at an exit strategy.

"As it has been prima facie found that the corporate announcements made by the company were false and misleading and the same were apparently aimed at inducing investors to trade in the shares of the company, there is real possibility that the promoters, who are noticees in this case, may start selling their shares and exit the company, leaving gullible investors in the lurch," the order stated.

SEBI also found that Kalahridhaan has approved another round of fundraising through rights issue. In view of this, the regulator decided to come out with an immediate fix in the form of an interim order to ensure that the public shareholders are not lured by the company's misleading claims.

"There is a risk that if further fund raising is not stopped, the public shareholders, lured by the false and misleading corporate announcements made by the company in the recent past, may be tempted to invest further in the company and suffer losses in the long run," the order stated.