Sebi Fines Veerkrupa Jewellers & FOCL for SME IPO Manipulation

The Securities and Exchange Board of India (Sebi) has levied penalties against Veerkrupa Jewellers and its lead merchant banker, First Overseas Capital Ltd (FOCL). This action follows an investigation into investor manipulation during the company’s SME IPO, which took place in June 2022.

The regulator found significant irregularities in how the IPO proceeds were handled, leading to violations of various regulations.

The Core of the Misconduct

The investigation uncovered that the net IPO proceeds, totaling Rs 7.95 crore, were not used as intended. These funds were designated for working capital but were instead transferred illegally.

Instead of flowing through the company’s bank account, the funds were directly moved from the public issue escrow account to four third-party gold vendors.

Procedural Breaches and Regulatory Violations

First Overseas Capital Ltd (FOCL) was found to have misused Annexure A2, a form specifically for intermediary fees, to facilitate these improper transfers. This bypass of the company’s official bank account violated mandated regulatory procedures.

Sebi cited breaches of multiple regulations in its findings:

• ICDR Regulations
• Merchant Bankers Regulations
• LODR Regulations

The penalties were imposed on several key individuals and entities involved in the misconduct. This includes Veerkrupa Jewellers’ Managing Director, Chirag Arvindbhai Shah, along with FOCL and several of its officials.

Their roles in the manipulation and repeated failures to comply with established regulations were central to Sebi’s enforcement action.