Sebi suspends trading in Bharat Global Developers alleging lapses

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The Securities and Exchange Board of India (Sebi) on Monday suspended trading in Bharat Global Developers, valued at over Rs 12,000 crore, after it found lapses in the company’s financials and disclosures, and fraudulent preferential allotment.

 

In an interim order, the market regulator has also debarred 17 others, including 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.

 

The market regulator will soon launch a detailed investigation, which it plans to wind up during the current financial year.

 

Sebi’s move came against the backdrop of several social media complaints last week, highlighting suspicious financials and disclosures by the firm.

 

The order points out that the company has created “paper wealth” with a market cap of over Rs 12,000 crore which is not backed by any genuine economic activity or production of any goods or services.

 

The watchdog has alleged that Rs 271.5 crore were made as illegal gains due to a preferential allotment under a fraudulent scheme designed to manipulate the prices and dump shares. These allottees had disproportionate control over the company. 

 

The company’s announcements and disclosures coincided with the lock-in period of the first tranche of preferential allotment which helped the allottees rake in huge profits. Some of these allottees were given shares at a price of Rs 10 apiece.

 

Sebi has alleged that there was a portrayal of expansion of business involving claims with reputed companies, false disclosures regarding high-value orders with non-existent companies, and showing non-existent technological and engineering expertise. Such false disclosures and claims led to an inflation in the stock’s price.

 

Shares of Bharat Global have seen a 105 times jump in the last year rising from just Rs 16.14 apiece in November 2023 to a high of Rs 1,703 in November 2024.

 

“This insidious fraud is being executed at the cost of the public which believe in the sanctity of disclosures made to the exchange by the company under applicable law,” noted Ashwani Bhatia, whole-time member of Sebi in the order.

 

Bharat Global Developers had also announced a large bonus and stock split for which the record date was December 26, which generated interest in the investors as “free shares”. This has not been stopped with the Sebi order.