SEBI suspends trading in Bharat Global Developers over 'staggering' scale of 'apparent fraud'

The Securities and Exchange Board of India (SEBI) on Monday suspended trading in Bharat Global Developers Ltd. (BGDL) shares, citing prima facie evidence of financial misrepresentation and a fraudulent scheme to defraud investors.

In an interim order, the market regulator detailed a series of violations by the company, including misleading financial disclosures, dubious preferential allotments, and manipulation of share prices.

BGDL's stock witnessed a meteoric rise from ₹16.14 in November 2023 to ₹1,702.95 by November 2024, raising alarms over possible foul play.

SEBI's investigation revealed that BGDL fabricated business expansions, announced fictitious high-value orders from marquee companies, and misrepresented its financial health to inflate its stock price. The alleged scheme was further linked to certain preferential allottees, who, after acquiring shares at ₹10 apiece, offloaded them at inflated market prices, reaping profits of over ₹269 crore.

Key findings in the case include the overhaul of BGDL's management in December 2023, followed by large preferential allotments concentrated among 41 allottees, disclosures of non-existent subsidiaries and fake business contracts to create positive market sentiment, financial statements showing negligible revenues until FY23, followed by sudden unexplained spikes in revenue and expenses in 2024.

"The shocking falsities peddled by the Company as legally mandated disclosures to the exchange lay bare a prima facie devious artifice involving systematic execution of a well-planned fraudulent scheme," SEBI whole time member Ashwani Bhatia said in the strongly-worded order.

"The sheer scale of the apparent fraud is staggering, as well as the way it has been achieved in about twelve months. Clearly the intent of the management appears to have been to mislead investors" the order stated.

"The unmistakable signs of a fraudulent artifice are visible behind the corporate veil of the Company. The brazen impunity with which the fraudulent scheme appears to have taken off should serve to shake up the ecosystem, including market infrastructure institutions which are expected to be first responders in such situations," it added.

SEBI also raised concerns over a planned bonus share issue and stock split scheduled for December 26, 2024, warning it could lead to further exploitation of retail investors.

The regulator has barred BGDL's key management personnel and certain preferential allottees from accessing the securities market and ordered the impounding of their alleged illegal gains. BGDL's compliance officer has been prohibited from associating with any SEBI-registered entities or public companies until further notice.

"Such actions restore credibility of markets. The scale of this apparent fraud, by any measure, is large,” SEBI said.

The regulator has directed a detailed investigation to be completed by March 31, 2025, while allowing the accused parties an opportunity to present their case within 21 days.

Trading in BGDL shares will remain suspended until SEBI issues a final order.

SEBI advised investors to exercise a "certain level of due diligence" while investing in such companies and take informed investment decisions.