SEBI bars Synoptics Technologies, promoters for siphoning off IPO funds

Indian Express

06-05-2025

The Securities and Exchange Board of India (SEBI) on Tuesday barred Mumbai-based Synoptics Technologies Ltd (STL) and its promoters from trading in securities market for siphoning away funds raised through the initial public offering (IPO).
The regulator has prohibited First Overseas Capital Ltd, which acted as the lead manager to the IPO of STL, from taking up any new assignment relating to merchant banking activities in the securities market till further directions.
'The facts brought out during the examination reveal a well laid out plan of the Company and the Lead Manager, FOCL, to siphon away funds raised in the IPO,' SEBI said in the interim order.
STL came out with a Rs 54.04 crore IPO and got listed on the SME Platform of NSE Ltd on July 13, 2023. Of the Rs 54.04 crore, Rs 35.08 crore was raised through a fresh issue of shares and the remaining Rs 18.96 crore was through an offer for sale of shares made by two promoters – Jatin Shah, also the company's Managing Director, and Jagmohan Manilal Shah.
As per the disclosures made in the Red Herring Prospectus (RHP) filed by STL, issue-related expenses amounted to Rs 80 lakh, of which Rs 50 lakh was to be paid from the proceeds of the fresh issue, while the remaining Rs 30 lakh was to be met by the selling shareholders under the offer for sale. Net of these expenses, STL was projected to receive Rs 34.58 crore from the public issue, to be utilized for repayment of borrowings (Rs 5 crore), working capital (Rs 17.58 crore), investment in strategic acquisition/ joint venture (Rs 5.3 crore) and general corporate purpose (Rs 6.7 crore).
In its investigation, SEBI found that Rs 19 crore from the issue proceeds was transferred out of the escrow account on July 12, 2023 – a day prior to the listing of the shares of the company and the grant of trading approval. These transfers were effected based on an instruction issued by FOCL to HDFC Bank on July 12, 2023, for release of issue-related expenses.
The order said that the amount transferred ostensibly for meeting issue related expenses —Rs 19 crore—was grossly disproportionate to the Rs 80 lakh disclosed as issue expenses in the RHP, and accounted for more than 54 per cent of the total proceeds raised by Synoptics through the fresh issue of shares and 35 per cent of the total issue size.
'The actions of FOCL in giving instructions for the transfers to HDFC Bank, Fort Branch, Mumbai, are shocking and stunning at the same time,' the order said.
When asked for a clarification, STL said the payments were not related to issue expenses and were instead for working capital (payment made to Dev Solutions) and strategic investment/joint venture objects (payment made to CN IT Solution and ABS Tech Services).
STL had disclosed that the target entities for the proposed strategic investment had not yet been identified. However, within 20 days of the RHP filing—and on the very day the IPO proceeds were credited to the issue account—funds earmarked for strategic investment and general corporate purposes were transferred to CN IT Solutions and ABS Tech Services toward the object of strategic acquisition. SEBI said during a site visit conducted by NSE, it was found that neither of the entities was present/located at the stated address.
In respect of Rs 6 crore transferred to Dev Solutions, a site visit by NSE revealed that no such business existed at the stated location.