 "Sebi suspends trading in Bharat Global Developers alleging lapses")
The Securities and Exchange Board of India (Sebi) on Monday suspended trading in Bharat Global Developers for alleged lapses in the company’s financials and disclosures, and fraudulent preferential allotment.
The market regulator has also debarred 17 others – including MD, CEO and other directors -- from buying, selling or dealing in the securities market until further orders, while the compliance officer has been restrained from associating with any listed company.
The market regulator will start a detailed investigation which may be completed within this financial year.
Sebi’s decision followed social media posts and complaints last week regarding suspicious financials and disclosures.
The order points out that the company has created “paper wealth” with a market cap of over Rs 12,000 crore which is not backed by any genuine economic activity or production of any goods or services.
The watchdog has alleged Rs 271.5 crore as illegal gains due to a preferential allotment under a fraudulent scheme designed to manipulate the prices and dump shares. These allottees had disproportionate control over the company.
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While the non-preferential allottee public shareholders comprise more than 99.9 per cent shareholders, they actually held less than a per cent of equity shareholding in the company.
The company’s announcements and disclosures coincided with the lock-in period of the first tranche of preferential allotment which helped the allottees rake in huge profits. Some of these allottees were given shares at a price of Rs 10 apiece.
Sebi has alleged that there was a portrayal of expansion of business involving claims with reputed companies, false disclosures regarding high-value orders with non-existent companies, and showing non-existent technological and engineering expertise. Such false disclosures and claims led to an inflation in the stock’s price.
Shares of Bharat Global have seen a 105 times jump in the last year, rising from just Rs 16.14 apiece in November 2023 to a high of Rs 1,703 in November 2024.
“This insidious fraud is being executed at the cost of the public which believe in the sanctity of disclosures made to the exchange by the Company under applicable law,” noted Ashwani Bhatia, whole-time member of Sebi in the order.
Bharat Global Developers had also announced a large bonus and stock split for which the record date was December 26 which generated interest in the investors as “free shares”. This has not been stopped with the Sebi order.
“The sheer scale of the apparent fraud is staggering, as well as the way it has been achieved in about twelve months. Clearly the intent of the management appears to have been to mislead investors,” notes the order.
Sebi has also frozen the bank and demat accounts of several others involved in the alleged fraudulent scheme.