SEBI bans Varanium Cloud, its promoter from capital market for misusing IPO proceeds

New Delhi [India], May 11 : Varanium Cloud Limited, a technology company, and its promoter and managing director Harshawardhan Hanmant Sabale have been banned from the securities market with immediate effect, by the financial market regulator SEBI.
The company was listed on NSE's SME Platform or NSE Emerge on September 27, 2022.
As per the company's disclosures, it was incorporated on December 21, 2017, and was formerly known as Streamcast Cloud Private Limited. Varanium is a technology company and, as per its website, is focused on providing services surrounding digital audio, video, and financial blockchain (for PayFac) based streaming services
As per a SEBI order, the company allegedly misutilised its initial public offer (IPO) proceeds and used dubious transactions to paint a false picture of good financial health and promising growth prospects to the general public.
This, according to the SEBI's order issued May 10, helped its promoter entities to exit the company "at the cost of gullible investors".
The investigations into the company by the financial market regulator SEBI were initiated after the publication of certain newspaper articles and social media posts and receipt of certain complaints raising concerns regarding, its financial statements published and corporate announcements made by it.
"...prima-facie observations and findings clearly indicate that Varanium has mis-utilized the IPO proceeds and has manipulated its financial statements by recording fictitious sales and purchases. The misstated financial statements had presented a rosy picture about the financial health of the Company, leading to increase in investors' interest in the stock," the SEBI order read.
The order noted that the same is evident from the increase in number of public shareholders from around 1,000 in September 2022 to more than 10,000 in December 2023.
The share price of Varanium also witnessed a significant increase during the said period.
"The promoter, taking advantage of such price rise, off-loaded shares and made huge gains..."
It has prima facie emerged that the money raised through the IPO and subsequent Rights Issue was not used for the intended purpose mentioned in the offer documents, SEBI order said.
It is also alleged the Promoter shifted part of IPO funds to an entity, BM Traders, and the end use of such funds is not known.
"What has emerged clearly from the examination done by SEBI and NSE is the fact that Varanium through its Promoter, Harshawardhan Hanmant Sabale, spun an intricate web of apparently dubious transactions and tried to paint a picture that did not represent the fundamentals of the Company. The Company made public announcements meant to give an impression to unsuspecting investors that Varanium was a top-notch IT service provider that was entering greenfield areas."
"In its effort to present such a picture, Varanium and its Promoter entered into transactions that appeared only on paper. Nothing was actually happening on ground and no economic activity was evident in any manner. No employment was generated as claimed by the Company."
In the entire sequence of events and the narrative built by the Promoter through public announcements, a positive sentiment was created which induced a large number of retail investors into purchasing the stock, the order stated.
Also, Harshawardhan Hanmant Sabale is restrained from acting as a Director or Key Managerial Personnel of any listed company or its subsidiary or any company which intends to raise money from the public or any SEBI registered intermediary, until further orders.