An investigation by the Securities and Exchange Board of India (SEBI) following a massive jump in the share price of Bharat Global Developers Ltd (BGDL) resulted in the market watchdog taking action against the firm, including barring it and key company officials.
On Monday, SEBI suspended trading of BGDL, alleging financial misrepresentation, manipulation of prices, improper disclosures, and inflating prices in a bid to offload shares. SEBI issued an interim order to freeze the profits amounting to Rs 271.6 crore made by preferential allottees by selling the shares.
The market regulator also barred BGDL CEO Mohsin Shaikh, MD Ashok Kumar Sewada, two of its directors, and many allottees of preferential shares in the securities market.
The BGDL stock was trading just above Rs 16 apiece in November 2023. But it jumped to around Rs 1,702 per share a year later, in November 2024, triggering the SEBI investigation. An official complaint about the stock was also filed last week, according to reports.
“Securities and Exchange Board of India took note of social media posts and a complaint dated December 16, 2024, regarding suspicious financials and disclosures by Bharat Global Developers Limited (BGDL), a company listed on the BSE. The scrip saw a steep 105 times jump in its share price from Rs 16.14 in November 2023 to Rs 1702.95 in November 2024,” the watchdog body said in the interim order.
SEBI reveals shocking details on how preferential allottees allegedly gamed the market
SEBI’s preliminary investigation found that back in June 2020, BGDL had five promoters who held 93,860 shares (or 16.77 per cent) of the total stock. But the company in September 2020 disclosed that the entire stock of the company was publicly held.
Then, in December 2023, the statutory auditor, the chief financial officer (CFO) and the director resigned, after which five new directors were assigned, SEBI elaborated.
After this, through two preferential share allotments—9.72 crore shares in April 2024 and 35 lakh shares in August 2024—more than 99 per cent of all shares were held by just 41 allottees, but they were classified as “public shareholders”.
In October 2024, the company made certain disclosures in the market stating orders secured from companies such as Reliance Industries, “TATA Agro and Consumer Products”, “McCain India Agro Pvt Ltd” and “UPL Agro Pvt Ltd”.
SEBI also found that BGDL claimed it set up a Dubai unit back in January 2024, and even said the subsidiary bagged high-value order worth Rs 251 crore “for processing and supplying high-value precious stones, including diamonds, rubies, emeralds and sapphires to prominent wholesalers and bespoke designer jewellery boutiques”.
All of this together led to a massive price hike, with the stock hitting its 2-week high of Rs 1702.95 on November 28, 2024. In the same month, 13 preferential allottees offloaded around 21 lakh shares, then valued at about Rs 271 crore.
“The sale of shares began immediately after lock-in was released on October 31, 2024. Since the shares were allotted at Rs 10, and sales were made at market price which had shot up after the company’s disclosures, a total profit of approximately Rs 269 crore was made by the thirteen preferential allottees from the first tranch,” said SEBI in the interim order.
The securities watchdog also listed out various misrepresentations the company made to exchanges over time. On October 30, 2024, one day before the lock-in period of the first tranche of preferential shares expired, BGDL announced the establishment of six new units—Bharat Global Green Energy Pvt Ltd, Bharat Global AgroTech Pvt Ltd, Bharat Global Aerospace and Defense Pvt Ltd, Bharat Global ImPex Pvt Ltd, Bharat Global Gems and Mining Pvt Ltd, Bharat Global Waste Management Pvt Ltd.
However, SEBI found no evidence of the establishment of these wholly-owned subsidiaries. “As on date, none of these six companies are reflected in the database of the Ministry of Corporate Affairs, suggesting that they have not been incorporated,” it said.
Other deal and order-winning announcements by BGDL were also debunked, and detailed in the SEBI statement.
“The disclosures and all events that have happened in a well-orchestrated manner could not have happened serendipitously; there was a design to it. Once seized of the prime facie fraud being effected by the Noticees, SEBI cannot be a mute spectator while the preferential allottees offload their stakes to a very large number of shareholders who invest in markets based on the supposed true disclosures by companies. Time and opportunity cannot be given to preferential allottees/noticees to offload their stakes to a very large number of shareholders who invest in markets based on the supposed true disclosures by companies,” Ashwani Bhatia, whole time member of SEBI, said in the regulator statement.