The Securities and Exchange Board of India (Sebi) has suspended trading in Bharat Global Developers Ltd (BGDL) shares until further notice over allegations of fraudulent activities and false disclosures.
The suspension, effective immediately, follows a probe that found significant irregularities in the company’s financials and operations.
BSE-listed BGDL saw its share price skyrocket 105 times over the past year, rising from ₹16.14 in November 2023 to ₹1,702.95 by November 2024, raising concerns of potential market manipulation.
A Sebi investigation uncovered a series of concerning developments at BGDL, starting with a drastic overhaul of its management in December 2023. Key resignations, including the company’s statutory auditor, chief financial officer, and several directors, followed a preferential allotment of shares to 41 allottees. These allotments resulted in 99.5% of the company’s shares being concentrated in the hands of a few individuals.
The preferential allotments were carried out at significantly discounted prices, with shares issued at ₹10 per share, despite the company’s stock price rising on a series of positive announcements.
The announcements, including deals with reputed companies like Reliance Industries, Tata Agrico, and McCain India, were later found to be fabricated. The company’s claims of establishing a wholly owned Dubai-based subsidiary were also never substantiated by official records.
Meanwhile, between November 2024 and December 2024, several preferential allottees sold large portions of their shares at market prices, making profits in excess of ₹270 crore.
The Sebi probe also found inconsistencies in BGDL’s financial statements. Before 2023-24, the company had negligible revenue, expenses, and assets. However, after the management overhaul and preferential allotments, the company reported a sharp revenue increase and a significantly expanded order book despite a lack of substantiated contracts and business activities.
Sebi’s findings suggest that BGDL used misleading disclosures to artificially inflate its stock price, thereby defrauding investors. The company’s efforts to portray itself as a thriving business with lucrative contracts appear to have been part of a deliberate scheme to manipulate the market, the regulator said.
The individuals involved in the preferential allotments have also been banned from participating in the securities market, including a ban on buying, selling, or dealing in BGDL’s securities directly or indirectly.
“The sheer scale of the apparent fraud is staggering, as well as how it has been achieved in about twelve months. The management’s intent appears to have been to mislead investors,” said Ashwani Bhatia, a whole-time member of Sebi.
BGDL’s share price as of 20 December 20 was ₹1236.45.
