Copyright thehindubusinessline
The Securities and Exchange Board of India (SEBI) has found evidence of siphoning of up to ₹100 crore of IPO funds in its ongoing probe into nearly 20 SME issues managed by merchant banker First Overseas Capital Ltd (FOCL), people familiar with the matter said. The regulator had barred FOCL last month for procedural losses. The investigation has revealed similar patterns of diversion of public-issue proceeds across several small- and medium-enterprise (SME) listings handled by FOCL. The companies under the scanner include Sameera Agro and Infra, Amanaya Ventures, QMS Medical Allied Services, Italian Edibles, Graphisads, Electro Force (India), Shree OSFM E-Mobility and Varanium Cloud, according to sources. “The investigation is ongoing, with some still at initial stages. SEBI has found evidence of a few crores being siphoned off from some SME companies’ IPO proceeds, by transferring to entities linked to promoters or vendors with no genuine operations,” said a source aware of the case. “Orders in these matters are expected over the next few months.” Funds diversion The regulator has conducted a forensic review of bank statements, vendor records and escrow-account flows in multiple SME IPOs managed by FOCL. Funds raised for working capital or business expansion were, in some instances, diverted within weeks of listing, the person said. These 20 companies together have raised around ₹560 crore through their public offers in the past three years. The total siphoned amount could be bigger as the probe progresses, said the source. hese SME IPOs were ranging between ₹2 crore to ₹80 crore. While SEBI passed a final order against FOCL last month, it addressed only procedural breaches such as net-worth shortfall, underwriting violations and disclosure lapses. The current investigation, sources said, is separate and focuses on possible misuse of IPO proceeds in issues managed by the firm. “The siphoning aspect is part of a broader, ongoing exercise that could involve both the merchant banker and company management,” another person said. Modus operandi In its earlier interim orders against two SMEs, the regulator said the offer proceeds were being misused through inflated vendor payments or advances to promoter-controlled entities. In the Nirman Agri Genetics case, for instance, the regulator found that ₹18.89 crore, or 93 per cent of the funds raised, was found to have been misutilised. In Synoptics Technologies nearly ₹19 crore was transferred from the escrow account on the eve of listing under the guise of issue-related expenses. Sources said SEBI is examining whether the same modus operandi was used across the other issues managed by FOCL, including those of Cell Point (India), On Door Concepts, Ducol Organics & Colours and Ishan International. Emails sent to SEBI, First Overseas Capital and the SME companies named above, did not elicit a response. Published on November 9, 2025
