Capital markets regulator SEBI has suspended trading in the scrip of computer hardware and equipment company Bharat Global Developers Ltd. until further orders for the alleged violations of SEBI rules by engaging in "suspicious financials and disclosure" and "misinterpreting" its financials and business. The order followed a complaint made against the company on December 16, 2024. Various posts on social media also highlighted suspicious disclosures and financials by the listed entity.

The SEBI order names 47 entities or promoters and individuals for various violations in its interim order issued today. Shares of Bharat Global Developers had closed at ₹1,236.45 on Friday, hitting a 5% lower circuit. After hitting a 52-week high of ₹1,702.95 on November 28, 2024, the stock has crashed 27%. The company had a total market capitalisation of over ₹12,500 crore as of its last session close. The scrip saw 2,304.14% surge in the past year alone, while its year-to-date gain stands at 2,122.23%. In the past six months, shares rose 538.33%.

The company, along with some others named in the SEBI order, has also been banned from buying, selling or dealing in securities, or accessing capital markets either.

SEBI says if the said notices have any open position in any exchange-traded derivative contracts, they can close out such open positions in 7 days from the date of order or at the expiry of such contracts, whichever is earlier.

The compliance officer, i.e., Noticee 6, Dhruvi Kothari, is restrained from associating herself with any intermediaries registered with SEBI, any listed public company or any company that intends to raise money from the public.

The alleged unlawful gains accrued to some persons named in the order, Noticees 7 to 19, from the sale of preferentially allotted shares as part of a prima facie fraudulent scheme, are impounded, SEBI said.

Banks where the noticees 7 to 19 are holding bank accounts are directed that no debits in their accounts will be made without permission of SEBI. Further, the depositories are also directed that no debit will be made without its permission in respect of the demat accounts held by them. However, credits into the accounts may be allowed.

All the notices have been directed to provide a full inventory of all their assets, whether movable or immovable. They have also been asked to not deal in shares of BGDL in any manner whatsoever. SEBI has also directed a detailed investigation into the matter.

SEBI's findings on BGDL matter

SEBI’s preliminary examination of complaints and reports in respect of BGDL revealed the company had five promoters holding 93,860 shares comprising 16.77% of total shareholding till June 2020. However, from the quarter ended September 2020, the company disclosed NIL promoter shareholding and 100% public shareholding.

In December 2023, the management of the company was overhauled and five new directors were appointed. After this, the company made two preferential allotments of shares – 9.72 crore shares in April 2024 to 31 allottees and 35 lakh shares in August 2024 to 10 allottees. These large preferential allotments resulted in 99.5% of the shareholding being concentrated in the hands of these 41 allottees, who were classified as “public” shareholders. The first tranche of preferentially allotted shares was locked in till October 31, 2024, and the second tranche is locked in till June 21, 2025.

On October 30, 2024, the company set up six subsidiaries in diverse business areas such as aerospace and defense, agro-technology and gems and mining. Beginning November 4, 2024, it started disclosing to the BSE details of certain “prestigious” high-value orders secured from ostensibly marquee companies such as "RIL", “TATA Agro & Consumer Products”, “McCain India Agro Pvt. Ltd.” and “UPL Agro Pvt. Ltd.”.

The company made claims in January 2024 about the establishment of a wholly owned Dubai-based subsidiary. On November 21, 2024, it disclosed that high-value orders worth Rs 251 crore had been secured by its wholly owned subsidiary based in Dubai for processing and supplying high-value precious stones, including diamonds. SEBI found that all these announcements were accompanied by a steep hike in the price of the scrip from Rs 642 on October 29, 2024, reaching its 52-week high of ₹1702.95/- on November 28, 2024.

SEBI examination revealed that between November 01, 2024, and December 20, 2024, 13 preferential allottees offloaded a total of 21,17,582 shares amounting to ₹271 crore, around 2.09.% of the total shareholding of the company to public shareholders. "The sale of shares began immediately after lock-in was released on October 31, 2024. Since the shares were allotted at INR 10, and sales were made at market price, which had shot up after the company’s disclosures, a total profit of ₹269 crore was made by the 12 preferential allottees from the first tranche."

The company's financial statements also appeared to misrepresent the true state of affairs. The financial statements revealed that till FY23, the company had negligible revenue, expenses, fixed assets and cash flows. The financial results from QE March 2024 showed a steep spike in revenues and expenses. This was accompanied by negligible fixed assets, negative cash flows from operating activities and huge amounts of trade receivables and payables.