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Synoptics Technologies, 3 Promoters Banned for IPO Fund Diversion, SEBI Also Bars First Overseas Capital from Taking New Assignments
Moneylife Digital Team 07 May 2025
Investor Interest
Market regulator, Securities and Exchange Board of India (SEBI), has barred Synoptics Technologies Ltd (STL) and its promoters Jatin Shah, Jagmohan Manilal Shah and Janvi Jatin Shah from participating in the market for diverting funds raised through STL’s initial public offering (IPO). 
 
Additionally, First Overseas Capital Ltd (FOCL), the lead manager for the IPO, has been prohibited from taking on any new assignments. SEBI found evidence suggesting that FOCL, in collaboration with STL, misused the IPO proceeds under the pretext of covering issue-related expenses.
 
In an interim order, SEBI’s whole-time member (WTM), Ashwani Bhatia, stated, “The examination reveals a well-planned scheme by the company and FOCL to siphon off IPO funds. FOCL, using the authority from the escrow agreement, seemingly directed the bank to transfer funds disguised as issue expenses.”
 
Synoptics Technologies, a Mumbai-based IT solutions-provider, launched its IPO on 13 July 2023, on the NSE SME platform (NSE Emerge), priced at Rs237 per share. The company raised Rs54.04 crore and Rs35.08 crore through fresh shares and Rs18.96 crore via an offer-for-sale by promoters. Initially, investor interest was lukewarm, but a last-minute surge in subscriptions, especially from high networth individuals (HNIs) and retail investors, helped the IPO get fully subscribed without underwriter support. However, SEBI soon began receiving complaints about how the IPO funds were being used.
 
A major red flag emerged when, on 12 July 2023, a day before trading began, Rs19 crore was transferred from the IPO escrow account to several third-party entities. This was a clear violation of the escrow agreement which stated that the funds could only be released after all necessary approvals were received.
 
FOCL claimed the transfers were for issue-related expenses. However, the red herring prospectus (RHP) indicated only Rs80 lakh was allocated for such costs. STL later argued that the money went toward working capital and strategic investments, which were valid uses according to the IPO, but SEBI found troubling inconsistencies.
 
For instance, Rs13 crore was transferred to CN IT Solutions and ABS Tech Services, both companies with whom STL signed agreements just a day earlier. These agreements were nearly identical, not notarised or registered, and there was no transfer of ownership or shares. Investigators found that the offices of both companies were vacant. STL labelled the payments as earnest money deposits (EMDs) to be returned in three years, but failed to provide board approvals or conduct any due diligence.
 
Another Rs6 crore was sent to a third company, Dev Solutions, under the same EMD model. This firm’s location was also found to be empty. By September 2023, STL recorded these Rs19 crore in transfers as ‘loans and advances’ in its books, causing the total in that category to jump from Rs1.70 crore to Rs21 crore. SEBI suspects this could be financial misrepresentation.
 
SEBI’s investigation also revealed that the bank accounts receiving the money did not belong to the named companies CN IT Solutions, ABS Tech Services, or Dev Solutions. Instead, they were in the names of unrelated individuals or businesses. SEBI’s preliminary findings point to a deliberate effort to misuse IPO funds and mislead both investors and regulators. 
 
SEBI's investigation is still ongoing and more action is expected based on future discoveries.
 
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