How Securities Worth INR 154 Crore Were Sold for Just INR 75 (USD 1)?

Author: Naman Gulechha, Associate, Wadia Ghandy & Co.
A Stitch in Time Saves Nine - Thomas Fuller
The stock market often witnesses price fluctuations, but a meteoric rise in valuation from INR 22.50 to INR 267.50 within just two months is highly unusual. LS Industries Limited (LSIL), a company with negligible revenue and no significant business operations, became the center of a massive financial scandal when it was discovered that shares worth INR 154.32 crore had been sold for a mere USD 1 (INR 75). This case exposed a classic pump-and-dump scheme, wherein stock prices were artificially inflated to attract unsuspecting investors, only to be subsequently crashed, enabling fraudsters to amass illicit profits.
The scandal came to light when an article titled “Mystery of a Zero Revenue Company With INR. 5500 Crore Market Valuation” was published by NDTV Profit. The SEBI promptly initiated an investigation after noticing that LS Industries' share price had inexplicably surged by 1089%, rising from INR 22.50 on July 23, 2024, to INR 267.50 by September 27, 2024. This was followed by a drastic 84% decline to INR 42.39 by November 21, 2024, before rebounding to INR 136.87 by December 23, 2024. Such extreme volatility, especially in a company with no fundamental growth, indicated clear signs of market manipulation.
LS Industries, formerly known as Lifestyle Fabrics Ltd., was a public company engaged in the textiles business. Its trading had been suspended from December 30, 2013, due to regulatory issues and was only reinstated on July 23, 2024. Despite being a company with zero operations, negligible revenue, and consistent financial losses, its market capitalization reached INR 22,700 crore, raising significant concerns. Upon deeper scrutiny, SEBI uncovered that Jahangir Panikkaveettil Perumbarambathu (JPP), an NRI based in Dubai, was at the heart of this controversy. He had acquired 10,28,82,050 shares (12.12% of LSIL) at a nominal price of INR 75 (USD 1) from the company’s former director, Suet Meng Chay. Given that LS Industries' last recorded share price before suspension was INR 15 per share, the actual worth of these shares was at least INR 154.32 crore at the time of transfer. Yet, JPP obtained them at an absurdly low price, raising strong suspicions of insider collusion and fraudulent transactions.
By the time LS Industries' stock reached its peak on September 27, 2024, JPP’s holdings were worth INR 2752 crore (USD 328.6 million). The sharp rise was no coincidence; it was deliberately orchestrated by a network of manipulators, including entities such as Multiplier Share & Stock Advisors Pvt. Ltd., Setu Securities Pvt. Ltd., Paresh Dhirajlal Shah, and Ruchira Goyal. These individuals executed a coordinated trading strategy, placing aggressive buy orders exactly at market opening i.e. exactly at 9:00 AM to trigger upward momentum and push the stock to its daily upper circuit. This artificial demand caused LSIL’s share price to skyrocket, attracting unsuspecting retail investors who assumed genuine market interest in the company. However, once the stock reached its peak, the same set of individuals aggressively sold their holdings, triggering a crash.
The sudden fall in share price from INR 267.50 to INR 42.39 was not accidental but a deliberate ploy to offload overpriced shares onto unsuspecting investors. Those who had orchestrated the price surge liquidated their holdings at a massive profit, while retail investors bore the brunt of the crash. Interestingly, the same group of manipulators later repurchased shares at lower levels, ensuring they profited once again when the stock price rebounded to INR 136.87 in December 2024. During this period, JPP offloaded 1,06,500 shares, making INR 1.14 crore in illicit gains, while still holding shares worth INR 698 crore as of February 10, 2025.
Adding to the complexity of the case, LS Industries issued misleading corporate announcements, claiming that it was entering the AI technology and robotic automation sectors. It proposed renaming itself as "AI Tech Limited", announced the incorporation of a foreign subsidiary in Dubai, and stated plans to invest in Robochef India Private Limited, a startup specializing in robotic chefs. These claims were clearly an attempt to create market hype, as most of these announcements came after the stock had already peaked. The involvement of Suresh Goyal, Alka Sahni, and Shashi Kant Sahni HUF, who were connected to Robochef, further deepened suspicions. Their trading activities showed that they sold shares when prices were high and repurchased them at lower levels, mirroring classic stock manipulation tactics.
SEBI’s investigation also revealed potential violations of the Foreign Exchange Management Act (FEMA). Given that JPP acquired shares far below their actual value, the transaction may have been structured to evade regulations and facilitate the illegal transfer of wealth. Further, JPP remitted significant funds to Dubai after selling his shares, raising concerns about money laundering. SEBI found that between October 2024 and January 2025, JPP transferred INR 70.91 lakh (AED 3,01,500) to Dubai. Such financial movements indicated that the scheme may have had international ramifications, requiring deeper scrutiny.
In response to the fraudulent activities, SEBI issued an interim order on February 11, 2025, imposing strict restrictions. JPP and other key manipulators were barred from trading LSIL shares, and SEBI froze their bank accounts and demat holdings to prevent further fund movements. Additionally, SEBI impounded JPP’s illicit gains of INR 1.14 crore and ordered an in-depth investigation, which is to be completed by May 15, 2025.
The LS Industries scandal serves as a stark reminder of the dangers of unchecked speculation and investor greed. Despite its lack of business operations and financial losses, LSIL reached an unrealistic valuation of INR 22,700 crore, proving that fraudulent stock market activities can create an illusion of prosperity while ultimately leading to significant investor losses. This case underscores the need for greater vigilance among investors. Investors must carefully scrutinize financial statements, assess a company’s business operations, and avoid blindly investing in stocks based on market hype.
While SEBI’s swift intervention has prevented further damage, the case highlights the urgent need for stronger regulatory mechanisms to detect and dismantle such fraudulent schemes before they cause widespread financial harm. As the proverb goes, “a stitch in time saves nine”—early regulatory action and informed investor decisions are crucial in maintaining a transparent and fair securities market. The responsibility lies not just with regulatory bodies but also with investors, who must exercise due diligence to safeguard their wealth from the traps of market manipulators.
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