Mumbai, August 25: The Securities and Exchange Board of India (SEBI) has imposed strict measures against Veranium Cloud Limited (VCL) and its Managing Director, Harshvardhan Hanmant Sable, for misusing investor funds, alleged financial manipulation, and misleading disclosures. Both have been banned from the securities market for seven years.
SEBI’s investigation revealed that the company allegedly exaggerated its data center operations, manipulated financial statements, and diverted funds raised from investors for the benefit of entities linked to the promoter group.
Harshvardhan Sable has been directed to return an illegal gain of ₹128.77 crore, along with 12% interest. Additionally, the company is required to recover ₹62.51 crore that was allegedly diverted from the funds raised from investors.
The investigation primarily focuses on the company’s initial public offering (IPO) in September 2022 and the subsequent rights issue. The company raised ₹40.39 crore through the IPO, claiming it would use the funds to establish container-based edge data centers and digital learning centers.
In the following year, the company raised an additional ₹48.45 crore through a rights issue. According to SEBI, approximately 89.83% of this amount was redirected to entities associated with the promoters, with ₹32.73 crore transferred directly to Harshvardhan Sable’s personal bank account.
During the investigation, SEBI found the company’s claims regarding its data centers to be misleading. Veranium Cloud claimed to have launched edge data centers in Goa and Sawantwadi. However, inspections by SEBI and the National Stock Exchange (NSE) found no such centers at the registered address in Sawantwadi.
Serious questions were also raised about the alleged data center in Goa. SEBI discovered that only six units of electricity were consumed at the facility over a month, indicating that the technical operations claimed by the company were likely not occurring. The investigation also revealed that the main vendor associated with the projects lacked necessary permanent assets.
SEBI reported evidence of alleged financial manipulation in the company’s accounts. The investigation indicated that the company recorded sales of ₹594.32 crore from a firm named Amtelphone Incorporated over two financial years. However, SEBI found no actual bank receipts to support these transactions, which were merely recorded as accounting entries.
Concerns were also raised regarding the company’s U.S. subsidiary, Veranium Cloud Inc. SEBI noted that this subsidiary had a capital of only $1,000 and no employees, yet it was represented as generating revenue of ₹392.11 crore in a single quarter.
SEBI stated that the company issued several corporate announcements that created an overly positive perception among investors regarding its business and future prospects. This included a potential acquisition of Fastway Transmissions Private Limited for ₹2,683 crore announced in February 2023.
According to the regulator, the proposed acquisition amount was nearly 20 times the company’s total net assets. Following this, the company reported a 984% increase in declared revenue, leading to a significant spike in its share price. SEBI alleges that the promoter group entities took advantage of this situation to sell their shares at inflated prices.
The investigation found that promoter-linked entities earned illegal gains exceeding ₹128.77 crore, while ordinary investors suffered losses.
SEBI has also taken action against other individuals and entities involved in the case. Harshvardhan Sable has been fined ₹20.4 crore, while the company faces a penalty of ₹1.3 crore.
Raj Jagatani, owner of BM Traders, has also been penalized. SEBI stated that this entity acted as a front, receiving over ₹138 crore from the company and Sable. Jagatani has been fined ₹10.1 crore and banned from the securities market for four years.
Additionally, the company’s Executive Director Vinayak Vasant Jadhav, Faheem Yunus Sheikh, and Chief Financial Officer Mukundan Raghavan have each been fined ₹6 lakh and banned from the securities market for one year.
Leave a Comment