Mumbai, Aug 25 (IANS) The Securities and Exchange Board of India (SEBI) on Tuesday said that it has barred Varanium Cloud Limited (VCL) and its Managing Director Harshawardhan Hanmant Sabale from the securities market for seven years after finding that the company fabricated data centre operations, manipulated financial statements and diverted investor funds to benefit promoter entities.
The regulator has directed Sabale to disgorge unlawful gains of Rs 128.77 crore, along with 12 per cent interest, and ordered VCL to recover Rs 62.51 crore that was diverted from funds raised from investors.
SEBI’s findings relate to VCL’s initial public offering (IPO) in September 2022 and a subsequent rights issue. The company raised Rs 40.39 crore through the IPO, stating that the proceeds would be used to establish containerised Edge Data Centres and Digital Learning Centres.
In the following year, VCL raised another Rs 48.45 crore through a rights issue. According to SEBI, 89.83 per cent of the rights issue proceeds were diverted to promoter-related entities. Of this amount, Rs 32.73 crore was transferred directly to Sabale’s personal bank account.
The regulator also found that VCL made misleading claims about its data centre infrastructure. The company had announced that it had commissioned Edge Data Centres in Goa and Sawantwadi. However, inspections conducted by SEBI and the National Stock Exchange (NSE) allegedly found no such facility at the registered address of the Sawantwadi centre.
The purported Goa facility also raised serious questions. SEBI found that it consumed only six units of electricity over a month, indicating that the claimed technology-intensive operations were not taking place. The regulator also noted that the primary vendor associated with the projects did not possess the fixed assets required to execute them.
SEBI further found evidence of financial manipulation through fictitious sales and purchase transactions. The company’s reported sales included Rs 594.32 crore attributed to a single entity, Amtelfone Incorporated, across two financial years. The regulator found that these transactions were only ledger entries and were not supported by actual banking receipts.
The company also reported substantial revenue from its US-based subsidiary, Varanium Cloud INC, despite the subsidiary having only $1,000 in capital and no employees. According to SEBI, the subsidiary was shown as generating Rs 392.11 crore in revenue in a single quarter.
The regulator said these financial statements were accompanied by misleading corporate announcements that helped create an inflated perception of VCL’s business and prospects. One such announcement in February 2023 concerned the proposed acquisition of Fastway Transmissions Private Ltd for Rs 2,683 crore.
SEBI noted that the proposed acquisition value was nearly 20 times VCL’s net worth. The regulator said the company’s reported revenue subsequently surged by 984 per cent, while the company’s share price also rose sharply, creating an opportunity for promoter entities to sell their holdings at elevated valuations.
According to SEBI, promoter entities made unlawful gains of more than Rs 128.77 crore by offloading shares at inflated prices, causing losses to unsuspecting investors.
The regulator has also taken action against other individuals and entities allegedly involved in the scheme. Sabale has been fined Rs 20.4 crore, while VCL has been penalised Rs 1.3 crore.
Raj Jagtani, proprietor of BM Traders, which SEBI identified as a front entity that received more than Rs 138 crore from VCL and Sabale, has been fined Rs 10.1 crore and barred from the securities market for four years.
VCL’s executive directors Vinayak Vasant Jadhav and Fahim Iunus Shaikh, along with Chief Financial Officer Mukundan Raghavan, have each been fined Rs 6 lakh and barred from the securities market for one year.
–IANS
pk
