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The Securities and Exchange on Board of India (SEBI) has suspended trading in Bharat Global Developers Ltd (BGDL), a BSE-listed company, after its stock prices surged over 10,000% between November 2023 and November 2024. This sharp rise was the result of false disclosures made by the company to exchanges. Following the SEBI’s action, the BSE suspended trading in the securities of BGDL with effect from December 23.
Taking note of social media posts and a complaint related to suspicious financials and disclosures by Bharat Global Developers Ltd, SEBI started its investigation. The Ahmedabad-based company is involved in the domains of green energy, engineering and infrastructure, aerospace and defense, and agriculture.
In its investigation, SEBI found that the management of BGDL was overhauled in December 2023, after which the company made two preferential allotment of shares — 9.72 crore shares in April 2024 to 31 allottees and 35 lakh shares in August 2024 to 10 allottees. This resulted in 99.5 per cent 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.
From October 2024, the company started making certain false disclosures to exchanges, including establishment of six subsidiaries in diverse business areas such as aerospace and defense, agro-technology and gems and mining and securing prestigious high-value orders from ostensibly marquee companies such as Reliance Industries Ltd, TATA Agro & Consumer Products, McCain India Agro Pvt. Ltd and UPL Agro Pvt Ltd.
All these announcements were accompanied by a steep hike in the price of the BGDL’s scrip from Rs 642 on October 29, 2024, reaching its 52-week high of Rs 1,702.95 on November 28, 2024.
A further examination revealed that between November 1, 2024 to December 20, 2024, thirteen preferential allottees offloaded a total of 21,17,582 shares amounting to approximately Rs 271 crore, which was around 2.09 per cent 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 Rs 10, and sales were made at market price which had shot up after the company’s disclosures, a total profit of approximately Rs 269 crore was made by the 13 preferential allottees from the first tranche.
“The object of BGDL’s actions/disclosures, that coincided with the end of the lock-in period of the first tranche of preferential allotment of shares, clearly appeared to be to create a positive sentiment of the operations of BGDL in the mind of investors so that liquidation of shares by certain preferential allottees was made possible,” the SEBI said in an interim order on December 23.
The financial statements of BGDL also appeared to misrepresent the true state of affairs of the company and its business.
Misstatements regarding its business, financials and prospects as disseminated by BGDL show an effort to drum up the company’s share price, the order noted.
“Once seized of the prime facie fraud being effected by the notices (BGDL and 46 individuals), SEBI cannot be a mute spectator while the preferential allottees offload their stakes to a very large number of shareholders who invest in markets based on the supposed true disclosures by companies,” the regulator said in the order.
Unchecked price rise in BGDL’s scrip
BGDL was earlier suspended for non-payment of listing fees by BSE. Upon revocation of suspension on November 9, 2023, trading in the scrip resumed. The scrip price started increasing from November 9, 2023, i.e., date of revocation of suspension from Rs 16.14 and touched an all-time high of Rs 1,702.95 on November 28, 2024.
The price of the scrip increased from Rs 674.30 on October 30, 2024 just before lock-in on the first tranche of preferentially allotted shares was released, to Rs 1,236.45 on December 20, 2024.
Based on scrip price variation and trading volume concentration in a few clients’ accounts, the company is currently placed under Stage IV of the Long-Term Additional Surveillance Measures framework of BSE — which involves a 5 per cent price band, 100 per cent margin on all clients and settlement on gross basis.
What is SEBI’s action on BGDL?
Besides the company, SEBI also took action against several individuals associated with the company. It restrained 18 individuals from buying, selling or dealing in securities, or accessing the capital market either directly or indirectly. The regulator also impounded the alleged unlawful gains earned through false disclosures.
What has BSE announced?
Immediately after SEBI’s interim order, the BSE, on December 23, suspended trading in the securities of Bharat Global Developers Ltd, with immediate effect.
