The share price of Morepen Labs plunged over 17 percent intraday on Wednesday after the market regulator SEBI barred the company from capital markets for a year.

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At 09:40 am, Morepen’s shares were trading lower by 13.79 percent at Rs 18.75 per share on the NSE. Intraday, the shares slipped 17.24 percent to Rs 18.

Sebi has prohibited Morepen from "accessing the securities market, directly or indirectly, and also restrained from buying, selling or otherwise dealing in the securities including units of mutual funds, either directly or indirectly or in any other manner whatsoever, for a period of one year".

The regulator noticed some arrangement being perpetrated by certain entities in respect of issuance of global depository receipts (GDRs) and therefore conducted an investigation into such issues of various companies, including Morepen Laboratories, made in March 2003.

The probe found that GDRs of Morepen were subscribed by two entities -- Solsec Company and Seviron Company -- both incorporated in the British Virgin Islands. These two entities had obtained loan through credit agreement from Lisbon-based Banco Efisa, S.F.E., S.A.

Further, Morepen had secured the loan obtained by Solsec and Seviron from Banco by pledging the GDR proceeds through 'Account Charge' agreement with Banco.

Sebi said that Morepen did not inform BSE about the execution of account Charge agreement entered in March 2003 with Banco which acted as a security for the loans availed by the subscribers and also that the GDR issue was subscribed by only two entities -- Solsec and Seviron.

Instead, Morepen made a misleading disclosure to the BSE that the issue of GDRs was successfully subscribed, it added.

With regard to the allegation of diversion of funds, Sebi said the company's audit committee has to monitor the end use of funds raised through public offers and therefore, the committee may look into the correctness of information provided in its annual report and report the same to the company's board of directors for taking appropriate corrective action, if any.

(Inputs from PTI)

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