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HomeMarket NewsSEBI bars Varyaa Creations from securities market, halts lead manager amid IPO proceeds irregularities
SEBI has frozen the promoter shares of Varyaa Creations and imposed restrictions on the lead manager, citing irregularities in the handling of IPO proceeds.
The Securities and Exchange Board of India (SEBI) has barred Varyaa Creations Limited from the securities market after finding that the company diverted IPO proceeds meant for business purposes. VCL, a company engaged in the wholesale trading of precious metals and jewellery, listed its shares on the SME Platform of BSE Ltd. on April 30, 2024.
SEBI also found that merchant banker Inventure Merchant Banker Services failed in its due diligence duties by allowing these fund movements without scrutiny. It has been restrained from taking on new IPO assignments.
SEBI initiated the inquiry after discovering irregularities during its routine inspection of Inventure’s activities. During the inquiry, SEBI found that more than 70% of the proceeds from the IPO (₹14 crore) were transferred on the day of listing, April 30, 2024, to three entities—Maruti Corporation, Kaveri Corporation, and Overseas Metal and Alloys Pvt Ltd.—under the instructions of Inventure. These transfers, made in the guise of covering issue-related expenses, raised concerns as they were disproportionate to the disclosed expenses in the IPO's prospectus.
VCL and Inventure were asked to explain the transfers, but VCL failed to provide a satisfactory response, citing the unavailability of its accounts team. The lead manager, Inventure, defended the transactions, stating that they were in line with the stated objectives of the IPO, including the purchase of inventory and corporate purposes.
Upon further investigation, SEBI found discrepancies in the use of the funds, noting that payments made to Kaveri Corporation, a sole proprietorship in the agriculture sector, and Overseas Metal and Alloys Pvt Ltd., did not align with the stated objectives of the IPO, particularly the opening of a new showroom in Agra. The transfer of funds and their subsequent withdrawal in cash raised red flags about the authenticity and purpose of the transactions.
As a result, SEBI issued interim directions, including freezing the shareholding of certain individuals involved and restraining Inventure from taking up new assignments in merchant banking. The regulator has also instructed that a monitoring agency be appointed for any ongoing projects involving Inventure.
