SEBI has vacated the interim directions issued on May 14, 2025 against Varyaa Creations Limited (VCL), a BSEIndia SME listed company, and its Lead Manager Inventure Merchant Banking Services Pvt. Ltd. (Inventure). During SEBIโs routine inspection of the Lead Manager, it noticed irregularities concerning the deployment of IPO proceeds, prompting regulatory intervention.
๐๐๐๐ค๐ ๐ซ๐จ๐ฎ๐ง๐:
SEBIโs interim order arose from a prima facie observation of atypical transfers from the IPO escrow account, approximately โน14 crore directed to three unrelated entities on the listing date, purportedly labelled as โissue related expenses,โ contrary to IPO disclosures which specified only โน42.91 lakh as total issue expenses.
SEBI had frozen promoter share transfers and restrained market access following SEBIโs prima facie concern over movement of โน14 crore of IPO proceeds to third parties without specified issue expenditure purpose.
Subsequently, Inventure challenged the interim order before the Honโble SAT. Vide order dated December 19, 2025, SAT recorded that the appellant had already submitted its reply before SEBI and directed that SEBI shall pass a final order on or before January 16, 2026.
๐๐๐ฏ๐จ๐๐๐ญ๐ข๐จ๐ง ๐จ๐ ๐๐ง๐ญ๐๐ซ๐ข๐ฆ ๐๐ข๐ซ๐๐๐ญ๐ข๐จ๐ง๐ฌ:
After detailed submissions and documentary evidence, SEBI accepted that:
(a)ย The entire โน14 crore was refunded to VCL, with approx. โน9 crore returned prior to the interim order, thereby ameliorating the core risk that had justified the interim freeze.
(b)ย Movements were attributable to advance payments for inventory rather than undisclosed expenditures.
On this basis, SEBI determined that the continuing risk of diversion of IPO proceeds no longer subsisted, and accordingly vacated all interim directions against VCL, its promoters and Inventure with immediate effect.
๐๐ง๐ ๐จ๐ข๐ง๐ ๐๐ง๐ฏ๐๐ฌ๐ญ๐ข๐ ๐๐ญ๐ข๐จ๐ง ๐๐ง๐ ๐๐๐ ๐ฎ๐ฅ๐๐ญ๐จ๐ซ๐ฒ ๐
๐จ๐๐ฎ๐ฌ:
However, the SEBI final order has explicitly continued the investigation to examine the nature of fund transfers from escrow in variance with the IPO Prospectus and end-use framework as well as role of merchant banker in transferring IPO proceeds from Escrow Account to third parties before crediting the IPO proceeds to the Companyโs account.
Key Takeaways for Market Participants:
(a)ย ย Merchant bankers must ensure strict compliance with ICDR end-use requirements and maintain transparent, documented fund authorisations.
(b)ย ย SEBIโs use of Section 11B powers to impose interim directions can be vacated once risk mitigation is demonstrated, yet substantive investigations under Section 11(4)(b) and related ICDR / MB Regulations persist.