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Indian Express
07-05-2025
- Business
- Indian Express
IPO fund diversion: Why SEBI banned Synoptics Technologies, promoters from markets
The Securities and Exchange Board of India (SEBI), in an interim order, has restrained Mumbai-based Synoptics Technologies Ltd (STL), a small and medium-sized (SME) information technology products and solution provider company, from trading in securities market for diversion and misutilisation of funds raised through initial public offering (IPO). Taking stern action on First Overseas Capital Ltd (FOCL), the merchant banker to the IPO, the regulator barred it from undertaking any fresh IPO-related assignments. How much money did STL raise through its IPO? STL came out with a Rs 54.04 crore IPO and got listed on the SME Platform of NSE Ltd on July 13, 2023. The IPO was a fixed-priced issue priced at Rs 237 per share. 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 utilised 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). Misutilisation of IPO proceeds The issue proceeds from STL's IPO were deposited into an escrow account maintained with Fort Branch, Mumbai, of HDFC Bank, the banker to the issue, on July 12, 2023. 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. The funds were transferred to ABS Tech Service (Rs 7 crore), CN IT Solutions (Rs 6 crore) and to Dev Solutions (Rs 6 crore) on an instruction issued by FOCL to HDFC Bank. FOCL said the payments pertained to 'amounts due from the company as issue management fees, underwriting and selling commissions, registrar fees, and other IPO related expenses'. SEBI said that the amount actually transferred was more than 23 times the disclosed figure (Rs 80 lakh), raising concerns about the nature, basis, and legitimacy of these payments. When the regulator sought an explanation from STL on this transfer of funds, the company informed that 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), as disclosed in the RHP. The order said that as on the date of filing the RHP (June 22, 2023), STL 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 Solution and ABS Tech Services toward the object of strategic acquisition. The agreements with CN IT Solutions and ABS Tech Services were executed on July 11, 2023 — a day prior to the credit of IPO proceeds to the escrow account maintained with HDFC Bank. Both agreements listed the same address for CN IT Solutions and ABS Tech Services. However, during a site visit conducted by NSE, it was found that neither of the entities was present/located at the stated address. With respect to the Rs 6 crore transferred to Dev Solutions — classified by STL as utilisation towards working capital — SEBI said the company failed to provide any reasonable justification for divergence in classification. A site visit to the address of Dev Solutions revealed that no such business existed at the stated location, raising serious concerns about the nature and authenticity of the payments made. On scrutinising the bank statements of the accounts to which funds were directed to be transferred by FOCL, SEBI found that these bank accounts were not held by the entities to whom FOCL had directed the transfers and with whom STL had purportedly entered into agreements. SEBI's interim order The markets regulator said that the facts brought out during the examination reveal a 'well laid out plan of the Company (STL) and the Lead Manager, FOCL, to siphon away funds raised in the IPO'. 'It, therefore, becomes necessary to restrain the promoters of the Company (STL) from alienating or encumbering their shareholding during the pendency of proceedings,' it said. SEBI, in the order, barred Synoptics Technologies Ltd, and its three promoters — Jatin Shah, Jagmohan Manilal Shah and Janvi Jatin Shah — from 'buying, selling or dealing in the securities market or associating themselves with the securities market, either directly or indirectly'. The regulator also prohibited First Overseas Capital Ltd from taking up any new assignment relating to merchant banking activities in the securities market till further directions. 'Findings, taken together, lead to a strong prima facie conclusion that FOCL, acting in concert with the company (STL), siphoned off a substantial portion of the issue proceeds,' the interim order said.
Indian Express
06-05-2025
- Business
- Indian Express
SEBI bars Synoptics Technologies, promoters for siphoning off IPO funds
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.
Economic Times
06-05-2025
- Business
- Economic Times
Sebi bans Synoptics Tech, promoters from securities market for IPO fund diversion
New Delhi, Markets regulator Sebi on Tuesday restrained Synoptics Technologies Ltd (STL) and its promoters from securities market following allegations of siphoning off IPO proceeds. Apart from Synoptics, the company's promoters Jatin Shah, Jagmohan Manilal Shah and Janvi Jatin Shah were also barred by the regulator. ADVERTISEMENT In an interim order, the regulator, said "the examination reveal a well laid out plan of the company (Synoptics Technologies) and the lead manager, FOCL (First Overseas Capital Ltd), to siphon away funds raised in the IPO". "Acting under the authority granted by an escrow agreement, FOCL prima facie appears to have issued instructions to the banker to the issue for transfer of funds under the guise of meeting issue-related expenses. "The amount transferred ostensibly for meeting 'Issue management fees, underwriting and selling commissions, registrar fees, and other IPO related expenses' was Rs 19 crore and grossly disproportionate to the Rs 80 lakh disclosed as issue expenses in the RHP (Red Herring Prospectus)," Sebi's whole time member Ashwani Bhatia said in the order. As per the order, the amount accounted for more than 54 per cent of the total proceeds raised by Synoptics through the fresh issue of shares worth Rs 35.08 crore and 35 per cent of the total issue size (Rs 54.04 crore). The markets watchdog concluded that FOCL, acting in concert with the Synoptics Technologies, siphoned off a substantial portion of the issue proceeds. ADVERTISEMENT Accordingly, Sebi directed FOCL not to take up any new assignments relating to merchant banking activities in the securities market till further directions from the regulator. Additionally, in respect of any pending assignments where FOCL is already engaged as a lead manager as on date, the issuer will appoint a monitoring agency to monitor the use of proceeds irrespective of the issue size, the order said. ADVERTISEMENT Sebi observed that FOCL, during the period May 1, 2022 to April 30, 2025, undertaken Initial Public Offering (IPO) assignments for 20 companies which listed on SME segment of BSE and NSE. The regulator said it will "examine the utilisation of funds raised in all these issues to identify whether a similar modus operandi was adopted in any of the other issues managed by FOCL during this period". ADVERTISEMENT Mumbai-based Synoptics Technologies raised Rs 54.04 crore through an Initial Public Offer (IPO) on the SME Platform of NSE in July 2023, and FOCL acted as the lead manager to the issue. The order came after the Securities and Exchange Board of India (Sebi) examined the matter on receiving complaints alleging irregularities in the bidding process following the closure of the IPO. (You can now subscribe to our ETMarkets WhatsApp channel)
Time of India
06-05-2025
- Business
- Time of India
Sebi bans Synoptics Tech, promoters from securities market for IPO fund diversion
Live Events New Delhi, Markets regulator Sebi on Tuesday restrained Synoptics Technologies Ltd (STL) and its promoters from securities market following allegations of siphoning off IPO proceeds. Apart from Synoptics, the company's promoters Jatin Shah, Jagmohan Manilal Shah and Janvi Jatin Shah were also barred by the an interim order, the regulator, said "the examination reveal a well laid out plan of the company (Synoptics Technologies) and the lead manager, FOCL (First Overseas Capital Ltd), to siphon away funds raised in the IPO"."Acting under the authority granted by an escrow agreement, FOCL prima facie appears to have issued instructions to the banker to the issue for transfer of funds under the guise of meeting issue-related expenses."The amount transferred ostensibly for meeting 'Issue management fees, underwriting and selling commissions, registrar fees, and other IPO related expenses' was Rs 19 crore and grossly disproportionate to the Rs 80 lakh disclosed as issue expenses in the RHP (Red Herring Prospectus)," Sebi's whole time member Ashwani Bhatia said in the per the order, the amount accounted for more than 54 per cent of the total proceeds raised by Synoptics through the fresh issue of shares worth Rs 35.08 crore and 35 per cent of the total issue size (Rs 54.04 crore).The markets watchdog concluded that FOCL, acting in concert with the Synoptics Technologies, siphoned off a substantial portion of the issue Sebi directed FOCL not to take up any new assignments relating to merchant banking activities in the securities market till further directions from the in respect of any pending assignments where FOCL is already engaged as a lead manager as on date, the issuer will appoint a monitoring agency to monitor the use of proceeds irrespective of the issue size, the order observed that FOCL, during the period May 1, 2022 to April 30, 2025, undertaken Initial Public Offering (IPO) assignments for 20 companies which listed on SME segment of BSE and regulator said it will "examine the utilisation of funds raised in all these issues to identify whether a similar modus operandi was adopted in any of the other issues managed by FOCL during this period".Mumbai-based Synoptics Technologies raised Rs 54.04 crore through an Initial Public Offer (IPO) on the SME Platform of NSE in July 2023, and FOCL acted as the lead manager to the order came after the Securities and Exchange Board of India (Sebi) examined the matter on receiving complaints alleging irregularities in the bidding process following the closure of the IPO.
