Introduction
In a significant development for India’s capital markets, the Securities and Exchange Board of India (SEBI) has confirmed its earlier interim order against Synoptics Technologies Limited (STL) and its merchant banker First Overseas Capital Limited (FOCL) for alleged diversion and misuse of funds raised through STL’s 2023 Initial Public Offering (IPO).
The confirmatory order, passed by Whole Time Member Kamlesh C. Varshney on October 3, 2025, continues the restrictions imposed on STL, its promoters, and FOCL pending the outcome of SEBI’s detailed investigation.
Background: The IPO and the Alleged Irregularities
Synoptics Technologies Limited, incorporated in 2008 and engaged in IT trading and networking solutions, came out with an SME IPO on NSE’s Emerge Platform in June–July 2023, raising a total of ₹54.04 crore.
- Fresh Issue: ₹35.08 crore
- Offer for Sale: ₹18.96 crore (by promoters)
- Lead Manager: First Overseas Capital Limited (FOCL)
According to the Red Herring Prospectus (RHP), the IPO proceeds were meant for specific purposes:
| Objective | Amount (₹ crore) |
|---|---|
| Repayment of borrowings | 5.00 |
| Working capital | 17.58 |
| Strategic acquisitions / joint ventures | 5.30 |
| General corporate purposes | 6.70 |
| Total | 34.58 |
However, SEBI’s examination found that ₹19 crore was transferred from the IPO escrow account before the shares were listed, contrary to the escrow agreement terms. This early transfer was made on instructions from FOCL, purportedly for “issue-related expenses”—which, according to the RHP, should have been only ₹80 lakh.
What SEBI Found: A Trail of Suspicious Transfers
The ₹19 crore in question was directed to three entities named by FOCL:
- CN IT Solutions
- ABS Tech Services
- Dev Solutions
However, upon investigating the actual bank accounts, SEBI discovered that the funds were credited to entirely different companies:
| Purported Recipient | Actual Account Holder |
|---|---|
| Dev Solutions | Sachiel Exim Pvt. Ltd. |
| ABS Tech Services | Transpaacific Shipping & Resources Pvt. Ltd. |
| CN IT Solutions | Dev Trading Ltd. |
Further, site visits revealed that none of the entities existed at their declared addresses, and the agreements signed with them were neither notarized nor registered.
Even more concerning, the so-called strategic investment agreements treated the payments as earnest money deposits (EMDs) refundable after three years — not equity investments or acquisitions.
SEBI’s Prima Facie Findings
SEBI’s interim order (May 6, 2025) found a prima facie case of fund diversion and a possible collusion between STL and FOCL. Key findings included:
- Payments made before listing approval, violating escrow norms.
- Transfers far exceeding the disclosed issue expenses (₹19 crore vs. ₹0.8 crore).
- The same address and identical templates for multiple recipient agreements.
- No board approval or due diligence before making investments.
- Failure to trace or recover funds for nearly two years.
Responses by the Company and the Merchant Banker
Synoptics Technologies Limited and Promoters
STL and its promoters — Jatin Shah, Jagmohan Manilal Shah, and Janvi Jatin Shah — denied any wrongdoing, stating:
- The findings were based on assumptions and not evidence.
- The ₹19 crore was meant for legitimate purposes like working capital and acquisitions.
- FOCL transferred funds directly from the escrow account without STL’s involvement.
- The company had no knowledge that funds were diverted to other entities.
However, SEBI noted that the company failed to provide evidence of follow-up with the supposed vendors or any action taken to recover the funds.
First Overseas Capital Limited (FOCL)
FOCL, the merchant banker, argued that it merely acted on instructions from the company under the Escrow Agreement.
FOCL claimed:
- It received written instructions from STL on July 7, 11, and 12, 2023 with bank details for the payments.
- It had no obligation to verify end-use of funds post-listing.
- It followed the prescribed format (Annexure A2) for fund transfers.
However, FOCL later changed its stance, claiming it used the wrong format by mistake. It also failed to produce the mobile screenshots or emails it cited as evidence, claiming they were lost in a malware attack.
SEBI’s Analysis: Contradictions and Non-Cooperation
SEBI observed that both STL and FOCL contradicted each other and avoided full cooperation.
Key inconsistencies included:
- STL’s affidavit did not confirm that the alleged July 11, 2023 email was forged, only that it was not found in its database.
- FOCL failed to furnish the requested mobile communication records or emails.
- STL did not follow up on ₹19 crore “missing” for almost two years.
SEBI noted this collective evasion as indicative of collusion and lack of transparency.
Tribunal Proceedings and Opportunity of Hearing
Both STL (and its promoters) and FOCL had appealed the interim order before the Securities Appellate Tribunal (SAT).
- SAT Order (June 18, 2025): Stayed SEBI’s interim order but required STL to comply with restrictions and file a reply within four weeks.
- SAT Order (July 31, 2025): Stayed the order for FOCL as well, with directions to cooperate and allow SEBI to issue a confirmatory order within eight weeks.
After providing inspection and a personal hearing on September 3, 2025, SEBI concluded that neither STL nor FOCL successfully rebutted the allegations.
SEBI’s Conclusion
In the confirmatory order, SEBI held that:
- The prima facie findings of fund diversion remain unrebutted.
- Both STL and FOCL acted in concert to divert ₹19 crore from IPO proceeds.
- Their conduct jeopardized investor confidence and the integrity of the market.
Therefore, SEBI decided to confirm its earlier directions:
- STL and its promoters remain restrained from buying, selling, or dealing in securities.
- FOCL shall not take up any new merchant banking assignments until further orders.
- Ongoing investigations will continue to trace the fund flow and determine culpability.
What Happens Next
The confirmatory order makes it clear that SEBI’s investigation is still ongoing.
Once the final findings are established, SEBI may initiate adjudication proceedings, impose monetary penalties, or even cancel registrations of involved intermediaries if wrongdoing is proven.
The case serves as an important reminder to issuers and merchant bankers alike that transparency in IPO fund utilization is not optional, and compliance failures will invite stringent regulatory scrutiny.
Key Takeaways
- ₹19 crore from Synoptics’ IPO allegedly diverted under the guise of issue expenses.
- Funds routed to unrelated entities; fake or non-existent companies involved.
- Merchant banker’s complicity suspected, but investigation continues.
- SEBI confirms trading and assignment bans, pending detailed probe.
- Investor protection and market integrity remain the regulatory priorities.
Author’s Note
The Synoptics Technologies case highlights how even small-cap IPOs can pose serious governance risks when oversight lapses occur. The SEBI order reinforces the regulator’s vigilance in tracing fund trails and holding both issuers and intermediaries accountable.