The Securities and Exchange Board of India (SEBI) is examining allegations of fraud against the promoters of Leel Electricals Ltd , formerly Lloyd Electric & Engineering, which recently sold its consumer division business to Havells. It has been alleged that promoters siphoned off the Havells deal proceeds to pay off private debt.

Criminal proceedings

According to sources, SEBI will soon launch adjudication and criminal proceedings against the promoters and some officials of Leel Electricals.

The regulator started a probe after a minority shareholder and well-known market investor Porinju Veliyath, who owns nearly eight per cent in Leel, complained of what he called a ‘day-light robbery’ by the promoters.

Veliyath informed SEBI that almost the entire ₹1,600 crore that Leel earned from the sale of its unit to Havells was diverted by promoters to private companies owned by them. SEBI has now found that a huge sum could have been diverted overseas and that large amounts were also used to pay off ‘so-called promoter debts.’ The regulator has found a trail for at least ₹900 crore siphoned off from the firm, the sources said.

SEBI investigations are at an advanced stage and an order may soon be passed by a wholetime member against Leel and its promoters, the sources added. Accounting firm Deloitte is conducting a forensic audit of the company. Since Veliyath made his allegations, all of Leel’s independent directors and compliance officials have quit.

Leel’s share price, which was trading at around ₹250 in 2018, has since crashed to ₹12. Last year, its shares had crashed from around ₹224 to ₹127 in just five trading days as it came to be known that a large chunk of cash had moved out of the company. Promoters led by Brij Raj Punj and Bharat Raj Punj own 54 per cent stake in Leel. Veliyath’s equity PMS portfolio took a hit due to the sharp drop in Leel’s share price.

‘ Daylight robbery’

“What has happened in Leel is day-light robbery. The company got nearly ₹1,550 crore in 2017 through a deal with Havells. Yet, it has been reduced to a market-cap of ₹40 crore. Investors will loose trust in the markets. One has to look where has the money flowed,” Veliyath, who is MD and Portfolio Manager at Equity Intelligence, told BusinessLine .

While Leel got ₹1,550 crore through the Havells deal, the balance ₹50 crore went to group company Fedders Lloyd Corp. At the end of September 2017, Leel’s debt stood at about ₹720 crore.

SEBI and Leel did not comment for this story. Bharat Punj did not take calls or reply to text messages. He could not be reached via email either.