NEW DELHI, Dec 23: On Monday, the Securities and Exchange Board of India (SEBI) suspended trading in Bharat Global Developers Ltd (BGDL) due to serious financial misconduct, including misleading disclosures, price manipulation, and the sale of shares at inflated values.
In addition, SEBI has prohibited the company along with its managing director Ashok Kumar Sewada, CEO Mohsin Shaikh, and directors Dinesh Kumar Sharma and Nirali Prabhatbhai Karetha, along with numerous preferential share allottees, encompassing a total of 18 entities from participating in the securities market.
SEBI’s interim order has also involved freezing illicit profits amounting to Rs 271.6 crore gained by preferential allottees via share sales.
This action followed an investigation started by SEBI into Bharat Global Developers after receiving social media alerts and a formal complaint on December 16, 2024.
The inquiry was initiated in response to a staggering 105-fold rise in BGDL’s share price, escalating from Rs 16.14 in November 2023 to Rs 1,702.95 in November 2024.
SEBI assessed whether the company breached securities regulations, including provisions of the SEBI Act, Prohibition of Fraudulent and Unfair Trade Practices (PFUTP) Regulations, and Listing Obligations and Disclosure Requirements (LODR) Regulations.
The investigation revealed that BGDL made substantial changes in management, engaged in preferential share allotments to chosen individuals, and disseminated false claims regarding business growth and collaborations. These actions aimed to artificially inflate share prices, enabling insiders to profit from the inflated values.
BGDL misrepresented itself as a prosperous entity with significant contracts and technological prowess, which was unfounded. This deception lured unsuspecting investors, significantly inflating the share price.
Additionally, the company’s financial reports appeared to inaccurately reflect its actual business condition. Up to FY23, the company showed negligible revenues, expenses, fixed assets, and cash flows. However, results reported for the quarter ending March 2024 displayed an abrupt increase in both revenues and expenses, coupled with minimal fixed assets, negative operating cash flows, and substantial trade receivables and payables.
Furthermore, SEBI observed a drastic increase in the number of shareholders, jumping from 10,129 in September 2024 to 44,976 by December 2024. Alarmingly, over 99.9% of these shareholders owned less than 1% equity, while a small number of preferential allottees controlled the majority of shares and benefited greatly.
Additionally, a planned bonus share issuance (8:10) and a share split (10:1) on December 26, 2024, would have further diluted ownership and inflated trading volumes.
“The misrepresentation concerning its business, financial status, and future prospects propagated by BGDL reflects an attempt to artificially inflate the company’s share price.
“In view of the evidence and findings… I conclude that under the facade of a compliant entity, BGDL has created fictitious wealth, currently boasting a market capitalization exceeding Rs 12,000 crore, without any substantial economic activity or genuine production of goods or services. This so-called wealth has been generated through the misrepresentation of the company’s operations and finances to investors and shareholders,” remarked Sebi Whole Time Member Ashwani Bhatia in his 25-page order.
As a result, SEBI has mandated that trading in Bharat Global Developers Ltd’s securities remains suspended until further notice.
Additionally, the regulator has prohibited the company, its senior management, and preferential allottees from engaging in any securities transactions or accessing the capital markets, either directly or indirectly, until further directives are issued.
Moreover, the compliance officer is barred from connecting with any SEBI-registered intermediaries, any public listed companies, or any entities intending to solicit public funds until further notice. (PTI)
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