For the banker, FOCL, SEBI has directed appointment of a monitoring agency to monitor the use of proceeds incase of pending assignments. 
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HEMANSHI KAMANI

The Securities and Exchange Board of India (SEBI) has banned Synoptics Technologies and its promoters from the market, and has restrained merchant banker First Overseas Capital (FOCL) from taking any new assignment for allegedly siphoning off funds raised in its initial public offer (IPO).

In an interim order, the regulator has restrained the technology company, and its promoters—Jatin Shah, Jagmohan Manilal Shah, and Janvi Jatin Shah—from buying, selling or dealing in the securities market or associating themselves with the market either directly or indirectly, in any manner whatsoever until further orders. For the banker, FOCL, SEBI has directed appointment of a monitoring agency to monitor the use of proceeds incase of pending assignments.

“The facts brought out during the examination reveal a well laid out plan of the company and the lead manager, FOCL, to siphon away funds raised in the IPO,” said SEBI whole-time member, Ashwani Bhatia. “Acting under the authority granted by an escrow agreement, FOCL prima facie appears to have issued instructions to the Banker to the Issue for transfer of funds under the guise of meeting issue-related expenses.”

However, the amount transferred for meeting ‘Issue management fees, underwriting and selling commissions, registrar fees, and other IPO related expenses’— ₹19 crore —was grossly disproportionate to the ₹80 lakh disclosed as issue expenses in the RHP, and accounted for more than 54 per cent of the total proceeds raised by Synoptics through the fresh issue of shares (₹ 35.08 crore) and 35 per cent of the total issue size (₹ 54.04 crore), the 21-page order said.

The actions of FOCL in giving instructions for the transfers to HDFC Bank, are “shocking and stunning” and in complete derogation of its role as a merchant banker, SEBI said. “Its continued presence in the market poses a serious risk to investors and the orderly functioning of the capital markets,” it said.

The regulator will also examine the utilisation of funds raised in the 20 companies whose IPO assignments were undertaken by FOCL over the past three years to identify whether a similar modus operandi was adopted in any of the other issues.

Published on May 6, 2025