Order against M/s. Todi Securities Pvt Ltd.

WTM/PS/IVD-ID2/ 29/MAY/2012 BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA CORAM: PRASHANT SARAN, WHOLE TIME MEMBER ORDER UNDER SECTIONS 11(1), 11(4) AND 11B OF THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992 IN THE MATTER OF IPO OF TIJARIA POLYPIPES LTD AGAINST M/S TODI SECURITIES P LTD(PAN: AABCT4191R )

1. The Securities and Exchange Board of India (hereinafter referred to as SEBI) had, pending investigation, vide an ad interim ex-parte order dated December 28, 2011 (hereinafter referred to as the Order dated Dec 28, 2011) inter alia prohibited M/s Todi Securities P Ltd from buying, selling or dealing in the securities market, in any manner whatsoever, till further directions. M/s Todi Securities P Ltd had filed its written submissions vide its letter dated January 10, 2012. An opportunity of personal hearing was afforded to M/s Todi Securities P Ltd on March 2, 2012, when Mr. Vinay Chauhan, Mr Sunil Singh and Mr S K Todi appeared on behalf of M/s Todi Securities P Ltd and made submissions.

2. I have considered the submissions made by the learned counsel on behalf of M/s Todi Securities P Ltd during the course of hearing and the written submissions dated January 10, 2012 and March 6, 2012. The limited issue to be considered at this stage is whether on a consideration of the submissions and documents submitted by M/s Todi Securities P Ltd, the ad interim ex-parte directions issued vide the Order dated Dec 28, 2011 against M/s Todi Securities P Ltd should be confirmed, vacated or modified in any manner.

3. Before proceeding further, it would be necessary to note the background of the matter. Tijaria Polypipes Ltd. (hereinafter referred as ‘TPL’) came out with its IPO raised 60 crore to fund its proposed expansion and diversification plans through a public issue of 1,00,00,000 equity shares of face value of 10 each, issued at a premium of 50 per share, i.e. ` 60 per equity share. The fixed price public issue which opened on September 27, 2011 and closed on September 29, 2011 was reportedly subscribed for 1.2 times. The company allotted 71,64,406 shares in retail investors category, which constituted 71.64 % of the total public issue. The shares of the company were listed on Exchanges Bombay Stock Exchange Limited (BSE) and National Stock Exchange of India Limited (NSE) on October 14, 2011. Hem Securities Ltd. was the lead manager to the issue. The issue was graded by ICRA Ltd. and was assigned “IPO Grade 2” which indicates below average fundamentals.

4. The investigation was initiated in the IPOs including TPL and the prima facie findings revealed that a predominant portion of the proceeds of the IPO of TPL was diverted by TPL for operations in the equity market leading to the suspicion that the issue was for siphoning off and/or diversion of funds. Further, the prima facie findings revealed that TPL had made several mis-statements relating to ICDs, placement of purchase orders, etc. Further, some clients who had traded on the day of listing had provided exit to the retail allottees and /or QIBs who were allotted shares in the IPO at a premium to the issue price and by doing so they had incurred huge losses. Further, six of the allottees namely Jivraj Zala, Lopa Saumil Bhavanagari, Pinac Stock Brokers P Ltd, Swift Tie Up P Ltd, Salasar Stock Broking P Ltd and Todi Securities P Ltd had provided exit to the retail allottees and /or QIBs who were allotted shares in the IPO at a premium to the issue price and by doing so they had incurred huge losses and were partly funded by the company, TPL, through layered transactions.

5. M/s Todi Securities P Ltd had made the following submissions vide its letter dated January 10, 2012 and March 6, 2012 which was reiterated by Mr. Vinay Chauhan, Mr Sunil Singhi and Mr SK Todi during the course of personal hearing:

a. The total turnover of M/s Todi Securities P Ltd as on October 14, 2011 was 2126.54 lakhs.

b. The shares of TPL were bought and sold in the ordinary course of business and the same was not actuated or motivated by an malafides or in order to provide exit to the QIBs. The alleged matching with the counter parties happened on the system of the exchange in the normal course without any knowledge and awareness of the counterparties.

c. They regularly keep borrowing from their sister concern, KBR Township P Ltd which is an NBFC and is in the business of borrowing and lending. While borrowing, KBR Township P Ltd was not aware of the source of funds of its lenders including Ballasaria Holdings Ltd.

d. He had denied that he is giving exit to the QIBs.

6. During the course of investigation it was revealed that in NSE, out of the total of 5,26,000 shares bought by Todi Securities Pvt. Ltd., 3,56,057 shares were bought from two QIBs, viz. CREDO and SPARROW, who were allotted shares in the IPO and 1,37,850 shares from one Shikha Somani Marriage Trust. 7. Further, it was observed that Tijaria Polypipes Ltd. had transferred approximately ` 89 lakhs from the IPO funds to Balasaria Holdings Pvt. Ltd. Balasaria Holdings Pvt. Ltd. layered the funds to hide the trail by routing it through Tilottama Holdings Pvt. Ltd and KBR Township Pvt. Ltd. bank accounts, instead of directly remitting the funds to Todi Securities Pvt. Ltd. Investigation has revealed that KBR Township Pvt. Ltd. is the group/ associate company of Todi Securities Pvt. Ltd. 8. I note that the investigation in the matter is under progress. SEBI shall expeditiously complete the investigation in the matter, in the interest of justice and thereafter shall take appropriate actions in accordance with law.

9. In view of the foregoing, I, in exercise of the powers conferred upon me under Section 19 of the Securities and Exchange Board of India Act, 1992 read with Sections 11(1), 11(4) and 11B thereof, hereby confirm the directions issued vide the ad interim ex-parte Order dated December 28, 2011 in the matter of IPO of Tijaria Polypipes Ltd, against M/s Todi Securities P Ltd. (PAN: AABCT4191R).

PRASHANT SARAN WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA PLACE: MUMBAI DATE: May 11, 2012.