SEBI finds ₹107.76 crore marketing commission paid to promoter entity

This order addresses SEBI's investigation into Setco Automotive Limited and its subsidiaries regarding alleged violations of securities laws, specifically concerning the diversion of funds to promoter entities through marketing commissions and the accuracy of financial statements for FY 2019-20 to FY 2021-22.

Who it concerns: Setco Automotive Ltd., Setco Auto Systems Pvt. Ltd., Harish Sheth, Udit Harish Sheth, Arun Arora, Ashok Kumar Jha, Suhasini Somesh Sathe, Rovinder Kumar Singla, Urja Harshal Shah, and Jatinder Bir Singh Gujral.

What SEBI found or ordered

• SEBI investigated whether financial statements for FY 2019-20 to FY 2021-22 were prepared in accordance with Accounting Standards.
• SEBI alleged diversion of funds to promoter entities (SEPL) via marketing/liaisoning commissions, including a one-time lump sum of Rs. 107.76 crores paid in 2021-22.
• SEBI alleged that Setco Auto Systems Pvt. Ltd. raised Rs. 265 crores from India Resurgence Fund (IRF) and Setco Automotive Ltd. raised Rs. 350 crores from IRF.
• SEBI issued a Show Cause Notice dated October 14, 2024, seeking directions to prohibit certain noticees from dealing in the securities market and imposing monetary penalties.
• The order cites violations of the SEBI Act, PFUTP Regulations, and LODR Regulations.

Also in the document

• The total amount raised from India Resurgence Fund (IRF) by the two main entities was Rs. 615 crores.
• The alleged one-time marketing commission payment to a promoter-controlled entity was Rs. 107.76 crores.
• The investigation covered a period of three financial years (FY 2019-20 to FY 2021-22).