The promoters of Varyaa are Pooja Vineet Naheta, Sarika Amit Naheta, Jaineshaa Amit Naheta and Pari Vineet Naheta. They collectively control over 70% of equity in Varyaa Creations Ltd.

The market regulator also restrained lead manager Inventure Merchant Banking Services Pvt Ltd from taking on new merchant banking assignments, pending a full investigation into its role.

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The action follows a probe into Varyaa’s ₹20.10 crore SME IPO that was listed on the BSE SME platform on 30 April 2024.

According to Sebi’s interim order, over ₹14 crore—about 70% of the IPO proceeds—was transferred directly from the public issue account to three entities on the day of listing based on the instructions of the lead manager, without first being routed through the company’s bank account.

Two of these entities—Kaveri Corporation and Overseas Metal and Alloys Pvt Ltd—received ₹4 crore and ₹5 crore, respectively. Sebi found that Gujarat-based sole proprietorship Kaveri, with no declared link to jewellery business, withdrew ₹9 crore in cash within minutes of receiving the funds. Overseas Metal and Alloys transferred nearly the entire amount to another company named “Transpaacific” the following day.

Notably, a similarly named firm, Transpaacific Shipping and Resources Pvt Ltd, was previously flagged by Sebi in the Synoptics Technologies IPO case for receiving misappropriated IPO funds.

The funds transferred to third parties in the guise of issue-related expenses on the instruction of the lead manager account for over 71% of the IPO proceeds, which is much higher than the issue-related expenses disclosed in the prospectus, Sebi noted while barring Inventure till further investigation.

Sebi also noted in the order that these transfers did not align with the company’s stated IPO objectives, which included capital expenditure and inventory purchases for a new showroom in Agra. “No disclosure was made regarding any payment to Kaveri Corporation …or Overseas Metal and Alloys,” Sebi noted, adding that both recipient firms are based in Ahmedabad and appear to be unconnected to the issuer’s business.

During a routine inspection into Inventure’s activities, Sebi found irregularities in VCL’s IPO process and launched an inquiry. During the inquiry, Sebi found that merchant banker First Overseas Capital Limited (FOCL) was going to act as the Lead Manager for the issue.

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However, after BSE made certain observations, Inventure took over as the Lead Manager.

With a lock-in expiry on a portion of the promoter’s shares falling on the same day as the order—May 14—Sebi said urgent interim action was warranted to prevent offloading of shares while investigations were ongoing.

The company’s recent board approval to raise ₹35 crore via a rights issue further raised red flags.

“It is surprising to note that VCL has now planned to raise an amount far more than the amount already raised from the public, within 13 months of its IPO,” said the order authored by Ashwani Bhatis, Sebi Whole Time Member.

In addition to freezing promoter holdings, Sebi directed that Inventure appoint a monitoring agency in all ongoing mandates, regardless of issue size. The company and its promoters have been given 21 days to respond and request a hearing.