SEBI, the financial market regulator, imposed an immediate ban on Varanium Cloud Limited, a technology company, and its promoter and managing director Harshawardhan Hanmant Sabale from the securities market. This decision follows allegations of misutilization of the company's initial public offering (IPO) proceeds and manipulation of financial statements to deceive investors.
Varanium Cloud Limited, which was listed on NSE's SME Platform or NSE Emerge in September 2022, allegedly engaged in dubious transactions to portray a false image of financial health and growth prospects. SEBI's investigations, initiated after concerns raised by media articles, social media posts, and complaints, revealed fictitious sales and purchases and misutilization of IPO funds.
The order highlights a substantial increase in public shareholders from around 1,000 in September 2022 to over 10,000 in December 2023, coinciding with a significant rise in Varanium's share price. The promoter took advantage of this surge to offload shares and make substantial gains.
Furthermore, it is alleged that IPO funds were diverted to an entity, BM Traders, with unknown end use. SEBI's examination uncovered a web of dubious transactions aimed at presenting a misleading picture of Varanium's performance and potential. The company's public announcements falsely portrayed it as a top-tier IT service provider entering new markets, while little actual economic activity was observed.
As a result, a positive sentiment was artificially created, leading to a surge in retail investors purchasing the stock. In light of these findings, Harshawardhan Hanmant Sabale is prohibited from acting as a Director or Key Managerial Personnel of any listed company, subsidiary, or entity intending to raise funds from the public, or any SEBI-registered intermediary until further notice.
