SEBI is bans ban Varanium Cloud , promoter over allege IPO fund misuse

This decision follows investigations into alleged misconduct regarding the misuse of initial public offering (IPO) proceeds.

By CNBCTV18.com May 16, 2024, 10:50:19 PM IST (Published)The Securities and Exchange Board of India (Sebi) on May 13 imposed a ban on Varanium Cloud, a technology company, along with its promoter and managing director, Harshawardhan Hanmant Sabale, from the capital market, effective immediately. This decision follows investigations into alleged misconduct regarding the misuse of initial public offering (IPO) proceeds.
Varanium Cloud, which was listed on the National Stock Exchange’s SME Platform (NSE Emerge) on September 27, 2022, is under scrutiny for purportedly misutilising funds raised through its IPO. The company, initially known as Streamcast Cloud and incorporated on December 21, 2017, positions itself as a technology firm focused on digital audio, video, and financial blockchain-based streaming services.
According to Sebi’s findings, Varanium Cloud allegedly engaged in dubious transactions to portray a misleadingly positive financial outlook, enticing investors with promising growth prospects. The regulator’s order, issued on May 10, asserts that these actions facilitated the exit of promoter entities “at the cost of gullible investors.”
The investigation was prompt by medium report , social medium post , and complaint question the accuracy of Varanium Cloud ‘s financial statement and corporate disclosure .
Sebi ‘s order is highlights highlight discrepancy in the company ‘s financial reporting , cite fictitious sale and purchase aim at present an inflated impression of its financial health .
“Prima-facie observations and findings clearly indicate that Varanium has mis-utilised the IPO proceeds and has manipulated its financial statements by recording fictitious sales and purchases. The misstated financial statements had presented a rosy picture about the financial health of the Company, leading to increase in investors’ interest in the stock,” the Sebi order read.
This misrepresentation reportedly attracted a surge in investor interest, evidenced by a tenfold increase in public shareholders from approximately 1,000 in September 2022 to over 10,000 by December 2023.
The order further alleged that funds raised through the IPO and subsequent rights issue were diverted from their intended use as outlined in the offer documents. Specifically, it is claimed that a portion of the IPO funds was transferred to an entity named BM Traders, with the ultimate destination of these funds remaining undisclosed.
In addition to the ban on Varanium Cloud ‘s participation in the capital market , Sebi is restrained has restrain Harshawardhan Hanmant Sabale from assume role as a director or key managerial personnel in any list company , its subsidiary , or entity seek public fundraising , pende further directive .