The investigation revealed that SMS Techsoft that had a paid up capital of Rs 5.05 crore with 50.57 lakh shares as on December 2011, had in March 2012 decided to issued three crore preference shares of Rs 10 each to three promoters and 28 other entities. Sebi found that out of the 28 entities, 27 has the same mobile number and a common email id and it belonged to a person named Rajesh Mangilal Ranka (an employee with the company) whom Sebi had restrained (by order dated July 28, 2010) from participating in the market for two years. The regulator determined that all 28 were connected to each other.
A closer look into the issuance of preference shares revealed a maze of transactions between Ranka, Manjulaben Shah (wife of an allottee Maheshchandra Chunilal Shah), SMS Techsoft and 19 allottee including the three promoters.
Apparently, while the company should have received Rs 30 crore as proceeds for preferential allotment of three crore share issued to the 31 entities including the promoters, the money never came to the company.
Sebi figured out that Ranka transferred Rs 1 crore into the joint account of Maheshchandra and Manjulaben Shah and that money was then transferred to the companys account which it transferred back to Manjulabens account. It was after that through a series of 59 transactions with the same money between Manjulaben, SMS Techsoft and 18 other allottees that allotment was carried out for them.
However, the money, after all this was completed, moved back from where it originated into the bank account of Rajesh Ranka. All this was completed in a matter of 17 days between March 3, 2012 to March 20, 2012.
Other than this, Sebi also figured out that the addresses provided by the company were incorrect.
While the company disclosed that it had utilised the proceeds of preferential allotment amounting to Rs 30 crore for purchase of a land, it was found to be incorrect.
This seemed to be only a part of the scheme. On March 12, 2013 when the lock-in period of the equity shares allotted to the 28 entities of the Ranka Group (i.e., allottees other than the promoters) under the purported preferential allotment expired, they started trading heavily in the stock and took its trading volume up from an average of around 38,000 shares (between January 1, 2013 and March 12, 2013) to over 28 lakh shares