Misuse of IPO Proceeds, Diversion of Funds, and Regulatory Deception
Date of Order: October 14, 2025
Order No.: WTM/KV/CFID/CFID-SEC2/31724/2025-26
Authority: Kamlesh C. Varshney, Whole Time Member, SEBI
Introduction
In one of the most striking cases of financial misconduct uncovered in the SME IPO market, the Securities and Exchange Board of India (SEBI) has passed an interim order against Nirman Agri Genetics Limited (NAGL) and its promoter, Mr. Pranav Kailas Bagal, alleging large-scale diversion and misuse of IPO funds, falsification of disclosures, and deceptive corporate maneuvers intended to mislead investors.
The order, issued on October 14, 2025, details how nearly 93% of the company’s IPO proceeds—approximately ₹18.89 crore out of the ₹20.3 crore raised—were misappropriated or diverted through a network of fictitious or related entities, including firms owned by the promoter and his family members.
Background of the Company and the IPO
Nirman Agri Genetics Limited, incorporated in August 2020 and headquartered in Nashik, Maharashtra, is engaged in the business of agricultural hybrid seeds, crop protection solutions, pesticides, and bio-organic products. The company launched its Initial Public Offering (IPO) in March 2023, raising ₹20.30 crore and listing its shares on the NSE SME Emerge platform on March 28, 2023.
The Lead Manager for the IPO was First Overseas Capital Limited (FOCL), the same merchant banker previously investigated in the Synoptics Technologies Limited case for similar misuse of IPO proceeds. Following SEBI’s findings in the Synoptics matter, the regulator initiated a sector-wide probe into IPOs handled by FOCL between May 2022 and April 2025, including Nirman Agri Genetics.
According to the company’s Red Herring Prospectus (RHP), the funds were intended for legitimate business purposes — ₹11.82 crore for working capital, ₹2 crore for strategic acquisitions, ₹0.45 crore for computer and hardware purchases, ₹3.73 crore for general corporate purposes, and ₹2.30 crore for issue-related expenses. However, SEBI’s examination revealed that the funds were routed to non-existent or connected entities under the guise of business payments.
SEBI’s Findings on Diversion of IPO Proceeds
In June and July 2025, the company submitted two versions of its fund utilization details to SEBI, each containing contradictory information. These inconsistencies immediately drew suspicion. For instance, an entity named Nilkanth Services & Trading appeared in the first submission but was missing in the revised one. Similarly, payments to SAE Impex were initially shown as ₹0.20 crore but later increased to ₹2.50 crore without explanation.
Upon forensic examination of bank accounts, SEBI discovered that from the HDFC Bank escrow account, ₹19.52 crore had been withdrawn—₹12.52 crore was sent to five so-called vendors, and ₹7 crore was moved to the company’s DBS Bank account. Out of these, ₹12.14 crore went to four entities — Janvi Traders, Lalit Traders, Somnath Agriculture Trading Co., and VN Enterprises.
Fictitious Vendors and Bogus Transactions
SEBI’s detailed analysis revealed that each of the four entities was either non-existent, operating under forged licenses, or linked to unrelated individuals.
- Janvi Traders, supposedly a seed vendor, received ₹2.5 crore on the day of listing, March 28, 2023. The entire amount was withdrawn in cash the same day. Upon a site visit, NSE officials found that the APMC license used by Janvi Traders was forged, originally issued to Durga Corporation. No business operations existed at the given address.
- Lalit Traders, which received ₹2.64 crore, turned out to be operated by an individual named Patel Sagarbhai, engaged in the courier business. The funds were swiftly routed to VN Enterprises, which withdrew ₹4 crore in cash on the same day.
- Somnath Agriculture Trading Co. received ₹3.5 crore, but SEBI found the account belonged to Seashell Aqua Logistics Pvt. Ltd., a logistics company unrelated to agriculture. Funds from this account eventually reached Visagar Financial Services Ltd., Bluestone Commodities LLP, and Mohit Minerals Ltd., eventually being deposited into fixed deposits—suggesting clear laundering of IPO money.
- VN Enterprises, which received ₹3.5 crore, was another shell entity. Funds were transferred to Bhagwati Traders, a commission agent whose APMC license had expired in 2021. Investigators found no trace of current operations.
In short, SEBI concluded that these entities were used as conduits to withdraw and rotate IPO funds in cash, leaving no legitimate business trail.
Flow of Funds to Promoter and Family Entities
Out of the ₹7 crore transferred to the DBS Bank account, ₹6.75 crore was further paid to five other entities on March 31, 2023 — Nilkanth Services and Trading Pvt. Ltd., SAE Impex International Pvt. Ltd., Aksol Renewables Pvt. Ltd., Future Green Agri Crop Science, and Vishnu Krushi Seva Kendra.
A forensic audit revealed that these payments ultimately ended up with promoter-linked accounts. For example, ₹2.5 crore sent to Nilkanth Services was rerouted to M.K. Agro Care, owned by the promoter’s father, and then partially transferred to the personal bank account of promoter Pranav Bagal and other family-owned entities.
Similarly, funds transferred to SAE Impex found their way to Aarohi Agri Science, owned by Abhishek Gupta, an independent director of NAGL. This entity then distributed nearly ₹2.30 crore to the promoter’s family companies, including M.K. Agro Care and Chaitanya Agri Crop Science, operated by the promoter’s cousin.
Payments to Aksol Renewables Pvt. Ltd. were also linked back to entities owned by the promoter’s relatives. SEBI’s analysis demonstrated that these interlinked transfers served no business purpose and represented a systematic siphoning of IPO proceeds through multiple layers.
Misrepresentation and Deceptive Conduct
SEBI observed that the company deliberately altered its IPO fund utilization disclosures and provided inconsistent data to obscure the money trail. The regulator also noted that while the company claimed to have spent funds on legitimate purchases, it failed to provide any agreements, invoices, or evidence to support such transactions.
Moreover, the company’s financial disclosures misrepresented its liquidity and operations, misleading investors who relied on IPO documents.
Promoter’s Share Sales and Risk to Investors
Compounding the issue, SEBI found that promoter Pranav Bagal had been aggressively offloading shares in the market while the company’s finances were misrepresented. His shareholding fell from 65.59% in March 2023 to 44.33% by September 2025, and he sold 8.6 lakh shares worth ₹16.08 crore in September 2025 alone through bulk trades at prices inflated by falsified financials.
These sales, conducted at a time when IPO proceeds had already been diverted, indicated an attempt to unload shares before regulatory exposure, posing a severe threat to unsuspecting retail investors.
SEBI’s Interim Findings and Legal Violations
SEBI concluded that 93% of IPO proceeds were misused, routed through fictitious vendors and related parties, and that the promoter and his associates directly benefited from these diversions.
Such conduct prima facie violated:
- Sections 12A(a), (b), and (c) of the SEBI Act, 1992, and
- Regulations 3(b), 3(c), 3(d) and 4(1) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices) Regulations, 2003.
The acts were deemed fraudulent and manipulative, intended to deceive investors and misrepresent the company’s financial position.
SEBI’s Interim Directions
Invoking powers under Sections 11(1), 11(4), and 11B of the SEBI Act, SEBI issued the following interim directions:
- Nirman Agri Genetics Limited was restrained from accessing the securities market in any manner until further orders.
- The company was barred from proceeding with its proposed corporate actions, including the planned bonus issue, stock split, and change of name (from Nirman Agri Genetics to Agriicare Life Crop Ltd.), as these were viewed as deceptive attempts to lure investors.
- Promoter Pranav Kailas Bagal was restrained from buying, selling, or dealing in securities of the company, either directly or indirectly.
- The order allowed settlement of transactions executed before its issuance but imposed an immediate freeze on further dealings.
SEBI directed stock exchanges, depositories, and registrars to ensure compliance with the order.
Conclusion
The Interim Order against Nirman Agri Genetics Limited represents one of SEBI’s most comprehensive actions against IPO-related fund diversion in the SME sector. It exposes how promoters can misuse public money under the guise of business operations, exploit familial networks to siphon funds, and mislead retail investors with cosmetic corporate actions.
By halting trading activities and corporate maneuvers, SEBI has acted decisively to protect market integrity and investor interests. The findings also highlight the regulator’s expanding scrutiny of merchant bankers and SME IPOs, many of which have shown patterns of fund misuse similar to the Synoptics case.
As investigations continue, this case will likely serve as a benchmark for fraudulent IPO enforcement, emphasizing that corporate governance failures in smaller listings are as consequential as those in large-cap markets.
Citation
Order Title: Interim Order in the matter of Nirman Agri Genetics Limited
Order No.: WTM/KV/CFID/CFID-SEC2/31724/2025-26
Date: October 14, 2025
Authority: Kamlesh C. Varshney, Whole Time Member, SEBI