Market Ban : What Led SEBI To Take Action Against Kalahridhaan Trendz?

The Securities and Exchange Board of India (SEBI) has barred Ahmedabad-based Kalahridhaan Trendz Limited (KTL) and its promotors due to regulatory violations. The company, listed on National Stock Exchange's SME Platform, came under SEBI's radar after the market regulator received several complaints from HDFC Bank.

SEBI has also issued notices against the company's Managing Director Niranjan D Agarwal, whole-time Director Aditya Agarwal and non-executive Director Sunitadevi Niranjan Agarwal.

Company Background

Incorporated as 'Kalahridhaan Trendz Private Limited', the company was listed on the NSE SME Platform since February 23, 2024, raising a total of Rs.22.49 crore at an issue price of Rs.45 per share. The company is engaged in the business of manufacturing and trading of various types of fabric and other related activities.

Kalahridhaan Trendz Earnings Over The Years

Year	Profit
2018-19	Rs 0.60 crore
2019-20	Rs 0.49 crore
2020-21	Rs 1.06 crore
2021-22	Rs 2.50 crore
2022-23	Rs 6.60 crore

HDFC Bank's Complaints Against Kalahridhaan Trendz

In its first letter to SEBI, filed on September 9, 2024, HDFC Bank complained regarding the outstanding payment of the company's credit card bill amounting to Rs 50.99 lakh. Despite repeated follow-ups, the company failed to settle the dues, even though it had sufficient financial resources.

HDFC Bank further pointed out that Kalahridhaan's MD also held the same position in Katex Exim Limited, an Ahmedabad-based bedwear company, that also defaulted on bank payments. However, the directors of KTL made sure to make small payments strategically to avoid any road blocks for launching their initial public offering (IPO) on the SME Platform.

Eventually, KTL cleared its pending dues after HDFC Bank filed a criminal lawsuit against the company for dishonouring a check worth Rs 75 lakh.

In a second letter to SEBI, dated November 18, 2024, HDFC Bank revealed that KTL had failed to notify SEBI regarding its default loan payment of Rs 30.23 lakh. The bank requested SEBI to conduct a thorough investigation into the financial status of the company, as well as the financial conduct of the directors.

SEBI Investigation Findings

SEBI's initial reports found that KTL made false and misleading corporate announcements about its financial status to attract investors, leading to fraudulent activities and unfair trade practices in the securities market.

SEBI's Whole-time Member Ashwani Bhatia noted that since the company lured investors with false information, there was a possibility that the promoters might offload their shares and exit the company, leaving investors stranded.

Additionally, the company has approved another fund raising through a Rights Issue. SEBI warned that unsuspecting shareholders could be further misled into investing, resulting in potential financial losses.

Further, KTL was found to have failed in making material disclosures regarding default payment of its dues in HDFC Bank, violating disclosure norms.