Retail participation in the SME (Small and Medium Enterprises) market has been growing a lot lately. As more small investors enter this space, some companies are taking unfair advantage of that interest. One such case came to light recently when SEBI exposed how Dronacharya Aerial Innovations Limited misled retail investors.
What Happened
SEBI’s report showed that the company tried to push up its stock price so that early investors who bought shares before the IPO could sell them at higher prices. To do this, they started releasing regular exchange filings claiming to have received big orders or tied up with well-known companies.
When people saw those updates, they thought the company was growing fast and started buying its shares. This buying pushed the share price up. During that time, the early investors began selling their shares quietly and made their exit.
If you look closely, the promoter holding in the company kept going down while retail participation went up. That clearly shows how they used fake optimism to attract new investors.
Financial Manipulation
It didn’t stop there. The company also played with its financial statements. Even though there wasn’t much actual cash flow, they showed that profits and revenues were rising sharply.
During the IPO, they raised around ₹33.96 crores, saying most of it — about ₹28 crores — was used to buy drones and accessories. But in reality, only ₹0.7 crores were spent on that. The remaining ₹27.28 crores were diverted to the promoter group.
Interestingly, even big Bollywood names like Aamir Khan and Ranbir Kapoor had been allotted shares before the IPO. Whether they exited or not is unclear, but their names surely added credibility and attracted more retail interest.
SEBI’s Action
After its investigation, SEBI acted quickly. It banned the company’s promoters for two years and imposed a penalty on them. This move is part of SEBI’s ongoing effort to keep the SME market fair and transparent.
Lately, SEBI has been keeping a close watch on similar cases and taking action whenever companies try to cheat investors. These steps are important because they make other companies think twice before doing anything wrong.
How Retail Investors Can Stay Safe
As retail investors, we should not jump into stocks just because of hype or big announcements. Before investing, it’s important to:
- Look at the company’s balance sheet and cash flow statements.
- Cross-check whether the claimed orders or partnerships are real.
- Be careful if promoter holdings are dropping steadily.
- Spread out investments instead of putting all money into one company.
By taking a little time to do our own research, we can avoid falling into such traps and make smarter investment choices.
