The capital market regulator also barred the merchant banker involved from taking up new initial public offering (IPO) assignments.

In a strongly-worded interim order issued on Tuesday, Sebi accused the two entities (the company and the merchant banker) of gross misuse of investor funds, including routing ₹2 crore to an individual who used the funds to buy shares of Synoptics on the listing day, thus creating artificial demand.

“It can be clearly concluded that funds transfers were not made to entities with whom STL had entered into agreements,” Sebi said in its 6 May order.

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“The explanation regarding deploying funds towards the objects of the issue furnished by the Company becomes untenable. The Company misrepresented all facts to Sebi,” the order by Whole Time Member Ashwani Bhatia said.

In a first-of-its-kind enforcement action, Sebi also barred the merchant banker, First Overseas Capital Ltd (FOCL), from taking on any new IPO assignments.

“The actions of FOCL in giving instructions for the transfers… are shocking and stunning at the same time,” Sebi’s order said.

“FOCL, having acted in complete derogation of its role as a merchant banker, cannot be permitted to undertake any fresh public issue assignments, as its continued presence in the market poses a serious risk to investors and the orderly functioning of the capital markets.”

Synoptics raised ₹54.04 crore through a fixed-price SME IPO in July 2023 on NSE Emerge, claiming it would use ₹34.58 crore of the fresh issue proceeds for working capital, strategic investments, and general corporate purposes.

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But on 12 July, a day before listing, ₹19 crore — more than half of the fresh issue proceeds — was withdrawn from the IPO escrow account. This transfer violated the escrow agreement, which clearly barred fund withdrawals before listing and trading approvals.

The money was moved on the instruction of FOCL, which claimed it was for “issue-related expenses,” despite Synoptics having disclosed just ₹80 lakh as such expenses in its prospectus.

Sebi’s investigation revealed that the funds were sent to three entities — ABS Tech Services, CN IT Solutions, and Dev Solutions — which did not exist at their stated addresses.

The bank accounts receiving the funds were not in the names of these entities, but in the names of unrelated shell companies like Sachiel Exim, Dev Trading, and Transpaacific Shipping and Resources Ltd.

All three agreements were unregistered, nearly identical, and structured as refundable deposits rather than strategic investments or working capital advances, Sebi found.

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The investigation further revealed that Dev Trading, which received ₹6 crore, transferred ₹2 crore to an individual named Nikhil Rajesh Singh. The next day — 13 July, 2023, the day of listing — Singh bought 1.6 lakh shares of Synoptics, worth ₹3.82 crore, at the listing price of ₹238 per share.

“It is apparent that a part of IPO proceeds was transferred to Dev Trading which transferred funds to Nikhil Rajesh Singh, who in turn used the funds for buying shares of STL,” Sebi observed.

In its interim order, Sebi barred Synoptics Technologies and its three promoters (Jatin Shah, Jagmohan Shah, and Janvi Shah) from participating in the securities market until further orders.

Furthermore, it also barred FOCL from taking up any new merchant banking assignments, after finding that the banker acted in concert with the company to siphon off substantial portion of the issue proceeds.

Sebi also directed issuers of ongoing IPOs being handled by FOCL to appoint an independent Monitoring Agency, even if the issue size is below the usual ₹100 crore threshold.

The interim order also indicated Sebi’s intention to widen its probe into the 20 SME IPOs which FOCL managed between May 2022 and April 2025.

“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”, Bhatia said in the order.

The company, its promoters, and FOCL have 21 days to respond, after which Sebi may pass final directions.