Citing SEBI’s ongoing investigation, the newspaper reported that the regulator found irregularities in the handling of IPO proceeds raised through several FOCL-linked SME listings. In some cases, funds were allegedly moved out of escrow accounts before the companies were listed, a clear breach of SEBI’s rules governing the use of issue proceeds. The report stated that Sameera Agro and Infra, Amanaya Ventures, QMS Medical Allied Services, Italian Edibles, Graphisads, Electro Force (India), Shree OSFM E-Mobility and Varanium Cloud were some of the companies under scanner, according to their sources.
As per BusinessLine, SEBI’s findings revealed that portions of the IPO funds classified as ‘issue-related expenses’ were diverted to entities with no genuine connection to the issuing companies. These transfers, the regulator noted, appeared to be part of a broader pattern of misuse of investor money intended for legitimate business purposes.
The report added that SEBI has identified multiple instances of such transactions across as many as 20 SME IPOs handled by FOCL between FY21-22 and FY24-25. In the case of the IPO of Nirman Agri Genetics Ltd the regulator found that Rs18.89 crore, or 93% of the funds raised, was found to have been mis-utilised. In Synoptics Technologies nearly Rs19 crore was transferred from the escrow account on the eve of listing under the guise of issue-related expenses.
According to the newspaper, the regulator is also examining whether a similar 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.
BusinessLine says SEBI’s interim measures also include enhanced scrutiny of FOCL’s past IPO mandates and a potential ban on the firm taking up any new public issue assignments until the probe concludes. The regulator is also reportedly considering actions against the issuers and promoters involved in the diversions.
Bhupen Dalal, stock broker and co-accused in the 1992 securities scam, is the
mentor of FOCL, as per the company website. His son Satyen is the managing director of FOCL, while other son, Asim is also part of the company’s top team.
Last month, SEBI imposed a penalty of Rs20 lakh on FOCL and barred the company from accessing the securities market for two years, citing persistent and serious violations of the SEBI Merchant Bankers Regulations, 1992 and related norms.
SEBI’s action followed two inspections of FOCL, the first conducted on 24th August to 25 August 2022, covering the FY21–22 and a follow-up inspection on 14th February to 15 February 2024, covering the period up to 31 October 2023.
Both inspections revealed multiple regulatory breaches, including the failure to maintain the minimum required net worth of Rs5 crore, engagement in non-securities business, acceptance of public deposits and submission of false and misleading information to the regulator.
SEBI's inspections showed that FOCL’s net worth had fallen below the mandatory Rs5 crore threshold since FY18–19, declining to just Rs13.90 lakh by FY21–22. Although the firm later claimed compliance, SEBI review found inflated figures, with the adjusted net worth standing at only Rs3.40 crore in March 2023 and Rs4.31 crore in September 2023 after accounting for doubtful loans and investment losses.
Last year in October, SEBI barred FOCL from taking any new mandate as a lead manager for any public issue of debt securities until further orders for allegedly violating merchant bankers' rules.
After the SEBI inspection, FOCL claimed that it did not utilise Rs7 crore as an advance towards a construction project, but it was given as a loan to Boisar Realty Pvt Ltd and Falcon Recreational Activities Pvt Ltd.
"On the other hand, the MB had issued letters to the two companies expressing interest in investing a sum of Rs3.50 crore each towards a joint development to acquire a land parcel at Boisar. The MB had denied that it had utilised the funds for carrying any business other than in the securities market. In view of the above, it is apparent that the MB had knowingly submitted false and misleading statement to SEBI," the market regulator says. (
Read: First Overseas Capital Barred from Acting as Lead Manager for New Issues)
