The Securities and Exchange Board of India (SEBI) has suspended trading in Bharat Global Developers (BGDL) shares, citing evidence of extensive financial misrepresentation and fraudulent activities designed to deceive investors.
The order issued on Monday, SEBI outlined a series of serious violations, including fabricated financial disclosures, dubious preferential allotments, and artificial manipulation of share prices. The regulator’s findings point to a coordinated effort by the company to inflate its stock value and mislead stakeholders.
Alarming Stock Surge
BGDL’s stock price surged dramatically from ₹16.14 in November 2023 to ₹1,702.95 by November 2024. This sharp increase triggered suspicion and prompted SEBI’s investigation, which uncovered a web of alleged deceit.
Key findings include the creation of fictitious high-value contracts, misrepresentation of financial health, and the fabrication of subsidiaries and business expansions. These tactics, SEBI said, were aimed at boosting market sentiment and driving up stock prices.
Fraudulent Gains and Preferential Allotments
The regulator revealed that certain preferential allottees acquired shares at ₹10 each and sold them at significantly inflated prices, resulting in profits exceeding ₹269 crore. Additionally, SEBI highlighted major management changes in December 2023, followed by large-scale preferential allotments concentrated among 41 individuals, who were reportedly central to the scheme.
Financial statements showed negligible revenue up to FY23, followed by unexplained spikes in both revenue and expenses during 2024, further reinforcing allegations of financial irregularities.
Regulator’s Strong Words
SEBI’s whole-time member, Ashwani Bhatia, described the scheme as a “staggering” fraud in the interim order, stating:
“The sheer scale of the apparent fraud is staggering, as well as the way it has been achieved in about twelve months. Clearly the intent of the management appears to have been to mislead investors.”
The order emphasised the audacity and scale of the alleged fraud, which it said exploited regulatory loopholes to mislead investors.
Preventive Actions and Investor Warning
SEBI also flagged a planned bonus share issue and stock split scheduled for December 26, 2024, cautioning that these moves could further harm retail investors. The regulator has barred BGDL’s key management personnel and several preferential allottees from accessing the securities market. It also ordered the confiscation of alleged illicit profits and restricted BGDL’s compliance officer from associating with any SEBI-registered entities or public companies.
SEBI has launched a detailed investigation into the matter, with a deadline for completion set for March 31, 2025. In the meantime, trading in BGDL shares will remain suspended, and the company has 21 days to respond to the allegations.
In its statement, SEBI urged investors to exercise caution, advising a “certain level of due diligence” when investing in such companies.
This development underscores the regulator’s commitment to maintaining market integrity and protecting investors from fraudulent practices.
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