LS Industries Shares Drop Amid SEBI Investigation

Shares of LS Industries Ltd (LSIL) have taken a hit, falling 4.99% today to ₹64.56 by 10:20 AM. Over the last five days, the stock has dropped 9.96%, and in the past month, it has lost 20.98%. The decline follows an interim order from the Securities and Exchange Board of India (SEBI), which flagged suspicious trading activity and possible regulatory violations.

Interim Order and Trading Restrictions

SEBI issued an interim order restricting LSIL and multiple individuals from trading. It also impounded ₹1.14 crore in unlawful gains from Jahangir Panikkaveettil Perumbarambathu, the NRI who received shares at a fraction of their value.

Additionally, LSIL has been barred from accessing the capital market until further notice, impacting investor confidence.

SEBI Flags Unusual Price Movements

The stock saw an unusual surge of 1089% in just over two months, climbing from ₹22.50 on July 23, 2024, to ₹267.50 on September 27, 2024. This sharp rise was seen despite LSIL reporting negligible revenue and operational losses for years.

SEBI noted that the company’s former director transferred shares worth crores for just $1 (₹75) to a Dubai-based NRI, raising questions about possible violations of the Foreign Exchange Management Act (FEMA).

Financials Don’t Match Valuation

LSIL, previously known as Lifestyle Fabrics Ltd., has reported negligible revenue from FY22 to FY24. Its financials show:

• Total income in FY24: ₹0.58 crore
• Consistently negative or nil cash from operations since FY16
• Debtor days rising from 118 in FY11 to 58, 416 in FY24

Despite these weak financials, LSIL’s market capitalization touched ₹22,700 crore in September 2024, raising concerns about price manipulation.

Suspicious Trading Patterns

SEBI’s investigation found that a few entities repeatedly placed buy orders, causing a rapid price increase. These same entities then offloaded shares in large volumes, leading to a price drop.

By November 21, 2024, the stock had fallen to ₹42.39, an 84.15% drop from its peak. The trading pattern closely resembled a pump-and-dump scheme.

Stock Continues to Decline

With the SEBI probe ongoing and trading restrictions in place, LSIL’s stock has continued to slide. The coming months will likely determine how the company responds to regulatory scrutiny and whether further action is taken.

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