SEBI bans Synoptics Tech from securities market, restrains First Overseas Capital from taking new assignments

a well laid out plan of the Company and the Lead Manager, FOCL, to siphon away funds raised in the IPO.

The market regulator has banned Synoptics Technologies and its promoters from the market, and has restrained First Overseas Capital Ltd (FOCL) from taking any new assignment after finding evidence that the company and the merchant banker siphoned off funds raised by the initial public offer (IPO).

In an interim order issued on May 6, the Securities and Exchange Board of India's (SEBI's) Whole-time Member Ashwani Bhatia said, "The facts brought out during the examination reveal a well laid out plan of the Company and the Lead Manager, FOCL, to siphon away funds raised in the IPO. Acting under the authority granted by an escrow agreement, FOCL prima facie appears to have issued instructions to the Banker to the Issue for transfer of funds under the guise of meeting issue-related expenses."

The amount transferred for issue management and other IPO-related expenses was more than 20 times what had been declared for issue expenses in the red herring prospectus (RHP). It was in fact more than half of the total proceeds raised by the company through the issue of shares.

In the order, Bhatia noted, "the amount so transferred ostensibly for meeting ‘Issue management fees, underwriting and selling commissions, Registrar fees, and other IPO related expenses’—₹19 Crore—was grossly disproportionate to the ₹80 lakh disclosed as issue expenses in the RHP, and accounted for more than 54% of the total proceeds raised by Synoptics through the fresh issue of shares (Rs. 35.08 Crore) and 35% of the total issue size (Rs. 54.04 Crore)"

The regulator has also said that it will examine other companies whose IPOs the merchant banker FOCL has overseen.

Bhatia wrote, "FOCL, during the period May 01, 2022 to April 30, 2025, has undertaken IPO assignments for 20 companies which listed on SME segment of BSE and NSE. SEBI shall examine the utilization of funds raised in all these issues to identify whether a similar modus operandi was adopted in any of the other issues managed by FOCL during this period."

Synoptics had come out with its IPO on July 13, 2023. The IPO, which was a fixed-priced issue priced at ₹237 per share, raised ₹54.04 Crore of which ₹35.08 Crore was through a fresh issue of shares and the remaining (₹18.96 Crore) was through an offer for sale of shares made by two promoters (two noticees in the order).