The Securities and Exchange Board of India (SEBI) has taken strict action against SME merchant bankers and companies following revelations that 71% of IPO funds were allocated to merchant banking and issue-related expenses. The regulatory body has barred Varaya Creations Limited (VCL) from accessing the market, frozen promoter shares, and restricted Inventure Merchant Banking Services from taking new assignments until further notice.
SEBI’s Investigation & Findings
SEBI’s inquiry uncovered fund diversion in VCL’s ₹20.10 crore IPO, where ₹14 crore was transferred to three entities—Kaveri Corporation, Maruti Corporation, and Overseas Metal and Alloys Pvt Ltd—immediately after listing. Shockingly, these funds were withdrawn within minutes, raising concerns over misuse of investor money.
Regulatory Action & Market Impact
SEBI’s interim order, issued by Whole Time Member Ashwani Bhatia, highlights systematic fund siphoning and collusive practices in SME IPOs. The regulator has warned that more enforcement actions are in the pipeline, as first-level regulators fail to curb malpractices.
Future Implications & Investor Protection
With 59 SME IPOs raising ₹2,455 crore in 2025, SEBI is expected to tighten regulations to prevent misuse of public funds. The crackdown aims to restore investor confidence and ensure greater transparency in SME listings.
For more updates on SEBI actions and IPO market trends, stay tuned!
