The market regulator Sebi has ordered the suspension of trading in Bharat Global Developers’ stocks, which have surged more than 10,000 per cent in the past year.
The decision came after it was discovered that the company had falsely claimed to have secured large orders from marquee corporates like Reliance, Tata Group, UPL, and McCain India Agro. The company’s shares are valued at over Rs 12,000 crore.
In an interim order, the regulator has also debarred 17 others, including the MD, CEO, and directors, from buying, selling, or dealing in the securities market until further orders.
The compliance officer has also been restrained from associating with any listed company. Sebi said it will soon launch a detailed investigation, which it plans to complete during the current financial year.
The Sebi crackdown came after it was found that the company was manipulating its stock prices through accounting frauds and fake disclosures. This underlines the dark side of the stock market boom that has seen equity benchmarks treble since the pandemic, as small investors, dazzled by impressive returns, are entering the market like there is no tomorrow.
In a late Monday evening order, the regulator suspended trading in Bharat Global, accusing it of making false claims about winning large orders from corporates such as Reliance Industries, Tata Group, UPL, and McCain India Agro.
Shares of the Gujarat-headquartered company have surged over 10,000 per cent in the past 12 months, rising from just Rs 16.14 in November 2023 to Rs 1,703 in November 2024. This surge followed its announcements about entering fancied sectors like defence, aerospace, and agro-technology, coupled with a series of false disclosures to stock exchanges about “high-value orders” from marquee corporates.
The order came barely a week after Sebi tightened rules related to the listing of SMEs. Prior to that, it had cancelled the SME share sale of Noida-based Trafiksol Technologies after a probe revealed a key vendor of the company to be a shell entity. Its IPO was oversubscribed by over 340 times.
Bharat Global had allotted about 100 million shares to 41 investors through preferential offerings in April and August at a significant discount to the market price. The Sebi order alleged that the disclosure of the orders from October was “false and misleading” and was timed to “benefit” preferential issue investors.
The regulator found that 13 of the 41 investors in the preferential share offering offloaded their holdings for Rs 270 crore after the lock-in period ended on October 31. Subsequently, the number of public shareholders rose four-fold to over 40,000, indicating that many unsuspecting investors bought the stock.
“Material disclosures by the company and the actions of the preferential allottees appear to have been planned towards the sale of shares to make a huge profit,” Sebi member Ashwani Bhatia said in the order.
The watchdog said the company had made illegal gains of Rs 271.5 crore through a preferential allotment under a fraudulent scheme designed to manipulate prices and dump shares. These allottees had disproportionate control over the company.
Bharat Global reported negligible revenue and profit before fiscal 2024 and had its shares suspended for trading until November 2023 due to the non-payment of listing fees to the BSE.
The Sebi crackdown followed several complaints on social media last week, highlighting suspicious financials and disclosures by the firm.
“This insidious fraud is being executed at the cost of the public, which believes in the sanctity of disclosures made to the exchange by the company under applicable law,” Bhatia said.
Bharat Global Developers had also announced a large bonus and stock split, with the record date set for December 26, which generated interest among investors as “free shares”. This has now been stopped by the Sebi order.
See insights
Boost a post
Like
Comment
Send
Share
