New Delhi, Aug 25: Sebi on Tuesday slapped fines totalling Rs 33.08 crore on SME company Varanium Cloud, its promoter Harshawardhan Hanmant Sabale, and seven others for misrepresenting the company’s financials and diversion of IPO proceeds.
Sebi action against Varanium Cloud
Besides, the regulator barred Varanium Cloud Ltd (VCL), and Sabale from the securities markets for seven years. Further, Sabale was also restrained from being associated with any listed company or a Sebi-registered intermediary as a director for 7 years.
In its final order, Sebi directed VCL to bring back Rs 62.51 crore, which has been found to be diverted, along with 12 per cent interest from the respective dates of debit transactions.
Sebi also directed Sabale to disgorge unlawful gains worth Rs 128.77 crore, along with 12 per cent interest per annum from the dates of sale of the shares till the date of deposit.
Findings on financial misrepresentation
In the 155-page order, Sebi found that VCL, Sabale, Vinayak Vasant Jadhav, Mukundan Raghavan and Fahim Iunus Shaikh were involved in the misrepresentation of contents in the prospectus and non-disclosure of pending litigation in the letter of offer and the subsequent siphoning-off of public issue proceeds to the tune of Rs 18.98 crore from IPO proceeds and Rs 43.53 crore from rights issue proceeds.
The regulator noted that Sabale had traded in the shares of VCL, and made unlawful gains to the tune of Rs 128.77 crore.
Similarly, Sebi observed Athos Capital Advisors and Raj Jagtani (Proprietor of BM Traders) have also made significant gains and received monies from VCL and Sabale.
Diversion of issue proceeds
“I note that Noticee no 2 (Sabale) exercised complete control over the movement of IPO and rights issue proceeds and approved transfer of funds.
“A total of Rs 62.51 crore (Rs 18.98 crore from IPO proceeds and Rs 43.53 crore from rights issue proceeds) was diverted from the proceeds of IPO and rights issue to related parties and other entities (including Rs 32.73 crore to Sabale) and he granted the approvals for the transfers,” Sebi’s Whole Time Member Amarjeet Singh said in the order.