Shares of DroneAcharya Aerial Innovations Ltd (DAIL) crashed for a second consecutive session, hitting the 20% lower circuit limit on Tuesday. This sharp decline follows a severe crackdown by the Securities and Exchange Board of India (SEBI), which has barred the company and its key promoters from the securities market for two years.
SEBI's Stern Action and Financial Penalties
The capital market regulator, in a detailed 105-page order, has imposed penalties totalling ₹75 lakh on the company and several related individuals and entities. The action stems from findings of misutilisation of IPO proceeds and fraudulent corporate disclosures intended to mislead investors.
SEBI's investigation revealed that after listing on the BSE SME platform on December 23, 2022, the company and its promoters made false and misleading announcements. The objective was to artificially create demand for the company's shares and prop up its falling price, thereby allowing pre-IPO investors to exit at inflated valuations.
Who Faces the Penalties?
The regulator has levied specific fines on the following:
- Prateek Srivastava (Promoter & MD) and Nikita Srivastava (Promoter & CFO): ₹20 lakh each.
- DroneAcharya Aerial Innovations Ltd (DAIL), Instafin Financial Advisors LLP, and Sandeep Ghate: ₹10 lakh each.
- Micro Infratech Pvt Ltd: ₹5 lakh.
Consequently, SEBI has restrained DAIL, Prateek Srivastava, Nikita Srivastava, Instafin Financial Advisors LLP, and Sandeep Ghate from accessing the securities market for two years. Micro Infratech faces a one-year ban.
The Core Violations Uncovered by SEBI
SEBI's order outlines several critical violations. The company, which had raised ₹33.96 crore through its initial public offering (IPO), was found to have deviated from the stated use of these funds without seeking shareholder approval.
Furthermore, the financial statements were manipulated. The regulator found that DAIL inflated its revenues and profits for the financial year 2023-24 by improperly including income from entities named Triconix and IRed. This misrepresentation painted a healthier financial picture than reality.
SEBI also noted that the company failed to make crucial disclosures in its prospectus regarding software/accessory quotations and provided incorrect information about the deviation of IPO funds. Instafin Financial Advisors and Sandeep Ghate were identified as active abettors, while Micro Infratech was found to have provided inflated invoices, aiding in the misutilisation of IPO money and the subsequent financial fraud.
Market Impact and Investor Fallout
The immediate market reaction has been brutal. The stock opened deep in the red on Tuesday and swiftly plunged to its lower price band, mirroring its performance from the previous session on Monday. This sustained sell-off reflects a complete erosion of investor confidence following the regulatory action.
SEBI's order underscores its commitment to cracking down on market manipulation and fraudulent practices, especially in the SME segment. The case highlights the risks associated with corporate governance failures and the severe consequences for companies that violate securities laws to mislead the investing public.
