SIPHONING OF IPO FUNDS BY 20 SMEs SEBII FINDS EVIDENCE FOR ISSUES MANAGED BY MERCHANT BANKER FIRST OVERSEAS CAPITAL LTD (FOCL)

 SIPHONING OF IPO FUNDS BY 20 SMEs SEBII FINDS EVIDENCE FOR ISSUES MANAGED BY MERCHANT BANKER FIRST OVERSEAS CAPITAL LTD  (FOCL)

SYNOPTICS TECHNOLOGIES LTD

SEBI’s probe cantered on Synoptics Technologies Ltd, an IT company that raised money via an SME IPO on the NSE Emerge platform.

The total IPO size was ₹ 54.04 crore, of which ₹ 35 crore was fresh issue money (i.e., funds raised from the public) according to SEBI.

PUBLIC  “ISSUE-RELATED EXPENSES.”

SEBI found that ~₹ 19 crore (about 54% of the fresh issue proceeds) was transferred out from the IPO escrow account before listing/trading began, under the guise of “issue-related expenses.”

BUDJETED  ISSUE RELATED EXPENSE

Crucially, this ₹ 19 cr was much larger than what was disclosed in the prospectus for issue-related expenses — Synoptics had declared only ₹ 0.80 Crore (₹ 80 lakhs) in the prospectus for those expenses.

WIDER PROBE — 20 SME IPOS IN FOCUS

SEBI has stated that it will examine ~20 other SME IPOs which had First Overseas Capital as the lead manager (between May 2022 and April 2025) to check if similar misuse occurred

SYNOPTIC & PROMOTERS BARRED:

 SEBI has debarred Synoptics Technologies and its three promoters (Jatin Shah, Jagmohan Shah, Janvi Shah) from the securities market, pending further investigations.

FOCL RESTRICTED:

SEBI has barred First Overseas Capital Ltd (FOCL) from taking any new merchant banking mandates (IPO management) until further orders.

REGULATORY RISK FOR SMES / IPO INVESTORS:

This is a big red flag for SME IPOs. SEBI’s move shows that even “small IPOs” (SME IPOs) are not free from serious misconduct.

MERCHANT BANKER ACCOUNTABILITY:

This case could set a precedent: merchant bankers can no longer just be "issue gatekeepers" they are being held accountable for post-IPO fund utilization.

R V SECKAR , FCS, LLB ,79047 19295