SEBI Orders ₹128.77 Crore Recovery over Alleged IPO Fund Misuse in Varanium Cloud Case

The Securities and Exchange Board of India (SEBI) has ordered the recovery of around ₹128.77 crore in allegedly illicit gains in the Varanium Cloud matter and imposed market restrictions on the company, its promoter and senior executives over alleged fraudulent practices involving IPO proceeds and financial disclosures.

In its final order dated August 25, 2026, SEBI said Varanium Cloud, its Managing Director Harshawardhan Hanmant Sabale, Executive Directors Vinayak Vasant Jadhav and Fahim Yunus Shaikh, and former Chief Financial Officer Mukundan Raghavan were involved in a scheme that allegedly misled investors.

SEBI has barred Varanium Cloud and Sabale from accessing or dealing in the securities market for seven years. Sabale has also been restricted from serving as a director or key managerial personnel of a listed company or a registered intermediary.

Other individuals named in the order have also been subjected to securities-market restrictions and restrictions on holding board or managerial positions in listed entities.

The regulator has additionally imposed a ₹33 crore penalty on the promoters, according to the final order.

IPO Proceeds, Financial Statements Under Scrutiny

SEBI’s action follows its findings that IPO proceeds were allegedly misused and that the company recorded fictitious sales and purchases in its financial statements.

The regulator had previously recorded prima facie findings that Varanium Cloud misused IPO proceeds and manipulated its financial statements during FY2023 and FY2024. SEBI had said the allegedly misstated accounts presented an overly positive picture of the company’s financial health and contributed to increased investor interest in its shares.

The latest final order also deals with allegations of misleading corporate disclosures, including information concerning acquisitions and overseas operations.

SEBI’s action extends to parties it found to have assisted or facilitated the alleged scheme.

Action Against Individuals and Merchant Banker

Raj Jagtani, proprietor of BM Traders, has been barred from the securities market over allegations linked to the diversion of IPO funds and non-compliance with summons.

Jinesh Mehta, an adviser and director of Athos Capital Advisors, has also faced restrictions over allegations including acting as an unregistered merchant banker and assisting the alleged scheme.

SEBI has also taken action against First Overseas Capital, the lead merchant banker for the public issue, citing deficiencies in due diligence and failure to conduct an adequate independent examination.

SEBI Stresses Independent Due Diligence

The regulator stressed that due diligence by a merchant banker cannot be limited to simply accepting information supplied by a company and must include reasonable efforts to uncover material issues relevant to an issue.

The finding places scrutiny not only on the alleged misuse of IPO proceeds and the company’s financial disclosures, but also on the role of intermediaries and other parties in the alleged scheme.