Sebi Confirms Market Ban on Synoptics Technologies and Promoters Over Alleged IPO Fund Diversion

The Securities and Exchange Board of India (Sebi) has upheld its market ban on Synoptics Technologies and its promoters amid an ongoing investigation into alleged siphoning of Initial Public Offering (IPO) proceeds. The regulatory action extends to promoters Jatin Shah, Jagmohan Manilal Shah, and Janvi Jatin Shah.

Allegations of Fund Misuse

Sebi's investigation uncovered that Rs 19.00 crore was transferred under the guise of 'issue management fees, underwriting and selling commissions, registrar fees, and other IPO related expenses.' This amount significantly exceeded the Rs 0.80 crore disclosed as issue expenses in the company's red herring prospectus.

Scale of Discrepancy

The alleged misused funds represent:

• Over 54% of the Rs 35.08 crore raised through fresh share issuance
• Approximately 35% of the total Rs 54.04 crore issue size

Regulatory Actions

In addition to the market ban on Synoptics Technologies and its promoters, Sebi has taken action against the IPO's lead manager:

• First Overseas Capital Ltd (FOCL), which served as the lead manager for the IPO, has been barred from taking on new merchant banking assignments.

Background of the IPO

Synoptics Technologies raised funds through a Small and Medium Enterprise (SME) IPO in July 2023. The IPO process was managed by FOCL as the lead manager.

Trigger for Investigation

Sebi's actions follow complaints about irregularities in the bidding process after the closure of the IPO. These complaints prompted the regulator to scrutinize the company's financial dealings related to the public offering.

The case underscores the importance of transparency and adherence to regulatory disclosures in the IPO process, particularly in the SME segment. As the investigation continues, market participants will be watching closely for any further developments and potential implications for SME listings in India.