Markets

SEBI bars Yash Birla, 8 others for diverting IPO proceeds

Our Bureau Mumbai | Updated on October 26, 2020

Birla Pacific Medspa raised ₹65 cr in 2001 to set up 15 spas, but invested it in inter-corporate deposits

Yash Birla has been penalised by SEBI for diverting stock market investor funds towards inter-corporate deposits of his own company. More than ₹30 crore of that amount is now not traceable.

Yash Birla is the great-grand son of Ghanshyam Das Birla, one of the founders of India’s leading business house and conglomerate. Later, the Birla family underwent many divisions.

Businesses that fell under Yash Birla included Zenith Steel, Birla Power, Birla Lifestyle and Shloka Infoteh, Birla Cotsyn. Most of these companies are credit defaulters.

SEBI acted against Birla nearly a decade after his company Birla Pacific Medspa Ltd raised more than ₹65 crore through an initial public offering on the pretext of investing in 15 spa centres.

Wilful defaulter

SEBI found that the promise was never fulfilled and money diverted to inter-corporate deposits, which is not recoverable now. Birla has been declared as a wilful defaulter by banks for nearly 5 years now.

Birla Pacific Medspa Ltd had come out with an IPO of ₹65 crore in 2011. The company had promised to set up Evolve Mid-spa with 15 centres by the end of March 2012, but not even a single centre was set up by that time, SEBI found. Shockingly, SEBI said 50 per cent of the IPO proceeds or ₹31.54 crore were deployed as inter-corporate deposits (ICDs) to group companies, out of which 60 percent of ICD’s were never returned to the company.

Not in liquid instruments

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.

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 SEBI order noted.

Published on October 26, 2020

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