The Securities and Exchange Board of India (SEBI) has barred listed real estate company Omaxe and 5 other entities and individuals from the securities market over what it described as an artificial arrangement to meet minimum public shareholding requirements. The regulator has also imposed a combined penalty of Rs 1.92 crore.

Omaxe will remain restricted from the securities market for 3 months, according to the order. Its promoters Rohtas Goel and Jai Bhagwan Goel, group companies Dream Home Developers Private Limited and Guild Builders Private Limited, and former joint managing director Sunil Goel have each been barred for one year.

What SEBI alleged

SEBI said Omaxe failed to achieve the required 25% minimum public shareholding through genuinely independent public shareholders. According to the regulator, certain entities purchased Omaxe shares using funds that had originated from the company or its group entities. Those entities were later shown as public shareholders.

The regulator said Omaxe and its group companies routed a total of Rs 46.50 crore through DVM Realtors Private Limited, also referred to as DRPL, Garv Buildtech Private Limited and Jeet Builders Private Limited, or JBPL. SEBI said the money was ultimately used to purchase Omaxe shares during offers for sale held on June 3, 2013 and October 29, 2013.

SEBI said the transactions could not be treated as separate fund transfers or independent share purchases. Its order stated that the arrangement was intended to create the appearance of independent public shareholding through entities whose money for buying Omaxe shares had come from the company or its group units.

Impact on reported public shareholding

The order also compared Omaxe's declared public shareholding with the level that would have remained after excluding shares purchased with company-linked funds.

After the June 3, 2013 offer for sale, Omaxe's public shareholding would have been about 14.57% instead of the declared 16.21%, SEBI said. Following the October 29, 2013 offer for sale, it would have been about 19.04% rather than the declared 20.97%.

The figures form part of SEBI's explanation for concluding that the public shareholding requirement had been met through an artificial structure rather than through independent ownership.

Conclusion

SEBI's order restricts Omaxe, its promoters, a former senior executive and 2 group companies from the securities market for specified periods, while imposing a total penalty of Rs 1.92 crore over the alleged public-shareholding arrangement.

Frequently Asked Questions

Q. Why did SEBI bar Omaxe from the securities market?

SEBI said Omaxe used an arrangement involving funds routed through group entities to create an artificial appearance of compliance with minimum public shareholding rules.

Q. How long is Omaxe barred?

Omaxe has been barred from the securities market for 3 months.

Q. Who faces one-year restrictions?

Rohtas Goel, Jai Bhagwan Goel, Sunil Goel, Dream Home Developers Private Limited and Guild Builders Private Limited each face a one-year restriction.

Q. What penalty did SEBI impose?

SEBI imposed a total penalty of Rs 1.92 crore in the case.

Q. What was the required minimum public shareholding?

SEBI referred to a requirement of 25% minimum public shareholding through independent public shareholders.

Q. Which share sales were examined?

The regulator examined offers for sale held on June 3, 2013 and October 29, 2013.