SEBI Probes Potential ₹100 Crore IPO Fund Siphoning in SME Issues Managed by First Overseas Capital

The Securities and Exchange Board of India (SEBI) is conducting an in-depth investigation into potential siphoning of up to ₹100 crore from Initial Public Offering (IPO) proceeds across approximately 20 Small and Medium-sized Enterprise (SME) listings managed by First Overseas Capital (FOCL). This ongoing probe is separate from a previous action against FOCL for procedural breaches. SEBI's investigation has uncovered a pattern where public issue proceeds, totaling around ₹560 crore raised by these companies over three years, were allegedly diverted. Funds intended for working capital or business expansion were reportedly transferred within weeks of listing to entities associated with promoters or vendors, which appear to lack genuine operational activities. SEBI has performed a forensic review of bank statements, vendor records, and escrow accounts for these IPOs. Examples include Nirman Agri Genetics, where ₹18.89 crore was reportedly misused, and Synoptics Technologies, which transferred nearly ₹19 crore from its escrow account as issue-related expenses shortly before listing. Companies like Italian Edibles, Varanium Cloud, and others are among those being examined to determine if the same modus operandi was employed. SEBI anticipates issuing orders related to these matters in the upcoming months.

Impact: This investigation has a significant impact on investor confidence in the Indian SME IPO market. It could lead to increased regulatory scrutiny, potentially stricter norms for IPO fund utilization, and reputational damage for the implicated companies and the merchant banker. The market may react cautiously to new SME listings until clarity emerges. Rating: 7/10.