Just 10 months after listing, Sebi bars SME company from markets over financial irregularities

In an interim order, the regulator barred the company and its promoters from accessing or associating themselves with the securities market in any manner.

“The company is found to have failed to make material disclosures regarding its default in repayment of its dues to HDFC Bank and also made false and misleading corporate announcements regarding its expansion and receipt of a large buy order from a fictitious entity from Bangladesh,” Sebi said.

Kalahridhaan Trendz is a textile company that manufactures and trades fabrics, including suitings, shirting, and dress materials. The company made its public debut in March last year and has since nearly lost its value.

Sebi’s investigation revealed that Kalahridhaan, which raised Rs 22.49 crore through its SME IPO in June 2023, diverted funds meant for business expansion, failed to disclose crucial financial details, and manipulated financial statements.

HDFC Bank, one of the lenders, had flagged non-payment issues related to Kalahridhaan’s loans, prompting further scrutiny by Sebi. Further, the company’s financials submitted during the IPO process did not match the reality of its banking transactions.The investigation found that the company used forged documents to show non-existent transactions, overstated revenues, and failed to disclose defaults on bank loans.”The analysis indicated that funds raised through the IPO were not used for the stated business purposes, including working capital and loan repayments, but instead routed through undisclosed entities. Additionally, the company’s bank accounts showed signs of financial distress, including loan defaults that were not disclosed to investors before the IPO,” an order release noted.

Sebi also flagged several irregularities in the company’s filings, including inflated sales figures and non-disclosure of related-party transactions. The regulator found that the company created false purchase and sales invoices to inflate revenue and mislead investors about its financial health.