Market regulator SEBI has imposed severe restrictions on Omaxe Ltd. and five other entities for allegedly creating an artificial public shareholding structure. According to reports from CNBC TV18 and The Economic Times, Omaxe has been restrained from accessing the securities market for three months, while promoters Rohtas Goel and Jai Bhagwan Goel, group companies Dream Home Developers Pvt Ltd and Guild Builders Pvt Ltd, have been barred for one year. Additionally, Sunil Goel, former joint managing director of Omaxe, has also been prohibited from the securities market for one year. As per CNBC TV18, the entities have been restrained from accessing the securities market and further prohibited from buying, selling or otherwise dealing in securities (including units of mutual funds), directly or indirectly, or being associated with the securities market in any manner, whatsoever for up to one year. According to The Economic Times, SEBI noted that "minimum public shareholding requirements were artificially met through funding of certain entities to acquire shares of the company and such entities were thereafter disclosed as public shareholders."
SEBI has imposed a fine of ₹1.92 crore on the entities involved in the alleged fraud. As reported by CNBC TV18 and The Economic Times, the regulator found that Omaxe failed to achieve the prescribed 25% minimum public shareholding (MPS) through independent public shareholders, as certain entities had acquired the company's shares using funds originating from Omaxe and its group entities. The scheme involved routing ₹46.50 crore through DVM Realtors Pvt Ltd (DRPL), Garv Buildtech Pvt Ltd and Jeet Builders Pvt Ltd (JBPL) to ultimately fund the acquisition of Omaxe's own shares during Offer for Sale (OFS) windows on June 3, 2013, and October 29, 2013. According to The Economic Times, SEBI noted that "these transactions cannot, therefore, be viewed as isolated fund transfers or independent share acquisitions." ₹13 crore moved through Garv Buildtech, while ₹33.50 crore was routed through DRPL. The fund trail was significant because Garv Buildtech was a wholly owned subsidiary of Guild Builders, a promoter of Omaxe, while DRPL was identified in Omaxe's FY13-14 annual report as an entity over which Omaxe's key managerial personnel or their relatives exercised significant influence.
The regulator's analysis revealed significant impacts on Omaxe's reported public shareholding percentages. According to CNBC TV18 and The Economic Times, after the June 3, 2013 offer for sale, exclusion of the funded holdings would have reduced Omaxe's public shareholding from 16.21% to around 14.57%. Similarly, after the October 29, 2013 OFS, public shareholding would have been around 19.04% instead of the reported 20.97%. Even after a subsequent bonus issue, excluding the funded holdings and the consequential bonus entitlement would have reduced the reported public shareholding from 25.01% to around 22.71%. In the June 2013 OFS, the identified entities were allotted 28.50 lakh shares, while another 4.92 lakh shares were allotted to such entities in the October 2013 OFS. In aggregate, the entities acquired 33.42 lakh Omaxe shares through the two OFS tranches, as reported by CNBC TV18.
SEBI's 91-page order found that the arrangement constituted a fraudulent and deceptive scheme and artifice in connection with dealing in securities. As reported by CNBC TV18 and The Economic Times, the regulator held that the scheme lay in creating the appearance of independent public shareholding through entities whose acquisition of Omaxe's shares had been financed through funds originating from Omaxe/group entities. The regulator found violations of provisions of the SEBI Act and Prevention of Fraudulent and Unfair Trade Practices Regulations, with Omaxe and the concerned noticees liable for violations relating to minimum public shareholding and disclosure of shareholding patterns. According to The Economic Times, SEBI noted that "these transactions cannot, therefore, be viewed as isolated fund transfers or independent share acquisitions." The regulator found that the ₹46.50 crore fund trail amounted to indirect financial assistance by Omaxe for the acquisition of its own shares, violating Section 77(2) of the Companies Act, 1956, which prohibited a public company from providing financial assistance for the purchase or subscription of its own shares. The arrangement created the appearance of independent public shareholding, while the underlying fund trail showed otherwise, as noted by SEBI.
According to CNBC TV18 and The Economic Times, the entities have been restrained from accessing the securities market and further prohibited from buying, selling or otherwise dealing in securities (including units of mutual funds), directly or indirectly, or being associated with the securities market in any manner, whatsoever for up to one year. The regulator imposed individual fines of ₹27 lakh each on Omaxe, Dream Home Developers and Guild Builders, while levying ₹37 lakh each on Rohtas Goel, Sunil Goel and Jai Bhagwan Goel. As reported by CNBC TV18, SEBI noted that the violations affected the accuracy of the company's shareholding disclosures and deprived investors of accurate information regarding Omaxe's ownership structure and regulatory compliance. While the order found no directly quantifiable monetary loss to investors, it held that the dissemination of incorrect shareholding information was prejudicial to investor interest. According to The Economic Times, the total fine imposed was ₹1.92 crore on all the entities involved in the fraudulent scheme.
