Fake Disclosures And Made-Up Names — Why SEBI Suspended Multibagger Bharat Global From Trading
Bharat Global Developers created a "completely false" narrative about its design, engineering and construction business, SEBI said.
The Securities and Exchange Board of India on Monday suspended trading in Bharat Global Developers Ltd. stock as it cracked down on the equipment maker over allegations of fake disclosures and misrepresentation of financials. The regulator also passed detailed orders with respect to 46 other noticees mentioned in the temporary order.
All the parties in the order have also been directed to disclose a list of their assets to the regulator within 15 days of the issuance of the order.
SEBI said that BGDL created a "completely false" narrative about its design, engineering and construction business and was actively trying to induce investors to buy its shares based on false disclosures.
A preliminary investigation revealed the Bharat Global falsely claimed to have orders from a McCain Group company and misrepresented orders from Reliance Industries Ltd., UPL Ltd. and the Tata Group. The modus operandi in all such instances seemed to be using fake names for companies that resembled well-established entities.
BGDL claimed to have received orders from clients including McCain India Agro Pvt., UPL Agro Pvt. Ltd. and TATA Agro & Consumer Products. SEBI's investigation revealed that neither McCain, nor UPL nor Tata Consumer Products Ltd. had any such subsidiaries.
Fraudulent Scheme, Price Manipulation And Public Impact
BGDL’s management was involved in replacing the company’s leadership and approved a preferential allotment of shares to 41 select allottees. These actions, along with other false claims were part of a broader scheme to manipulate the stock price, the regulator observed,
The preferential allottees profited by selling shares at artificially higher prices at the expense of investors.
Over 2% of BGDL’s shares were dumped on investors at falsely modified prices between Nov. 1 and Dec. 20, 2024, causing financial harm. Additionally, the number of public shareholders grew from 10,129 in September to nearly 45,000 by December, despite these shares being largely controlled by a few preferential allottees.
SEBI has also observed in its temporary order that continued trading of BGDL shares would expose retail investors to the risk of holding worthless stock. This is because the company’s share price had no connection to its actual business activities.
SEBI Action
As part of its order, SEBI also impounded 'unlawful gains' accrued to
several noticees who got company shares via two preferential allotments earlier this year.
SEBI highlighted how, despite having negligible revenue for eleven fiscals from 2012, BGDL suddenly started making disclosures about business expansions and high-value orders from renowned companies from October, 2024.
The regulator has hence undertaken to complete its investigation on the company and other noticees by March 31 next year.
Bharat Global Developers' stock has spiked over 2,350% since December last year despite hitting the 5% lower circuit in the last two sessions. It hit a record high of Rs 1,702.95 per share on Nov. 27, and has fallen 24% since then.
