Sebi ultimatum to VLS Finance promoters

Sebi has directed VLS Finance promoters, M. P. Mehrotra and Somesh Mehrotra, to honour their commitment relating to the conversion of warrants as undertaken by them in the prospectus of its IPO in 1994 within 30 days. Serving the ultimatum, Sebi in its order dated September 20, said if the company fails to comply with the order, the promoters and companies which they have promoted or in which they are holding or controlling a substantial interest, would be restrained, from accessing the capital market, directly or indirectly for a period of 5 years.

The IPO prospectus of the company stated that the promoters would undertake to opt for conversion at Rs 400 per share and the conversion would be opted in phases. However, on the basis of the information submitted by the company to the DSE, Sebi was informed that the promoters of the company did not opt for conversion of the optionally convertible non-transferable warrants in 96-97 and 97-98 and in 1998, the company allotted one lakh equity shares of Rs 10 each against 1 lakh warrants.

The company was contending that as these warrants are optionally convertible, the promoters had the right to opt for conversion of these warrants into equity shares into any number of equity shares between 0 to 10. Accordingly, it had opted for conversion of each warrant into only one equity shares instead of 10 equity shares.