SEBI Suspends Trading in Bharat Global Developers Following 10,000% Stock Surge

 

A mail sent to Bharat Global Developers by Sebi seeking comment did not elicit any response

The Securities and Exchange Board of India (SEBI) has suspended trading in the shares of Ahmedabad-based Bharat Global Developers Ltd (BGDL) after an unprecedented 10,000% surge in its stock price over the past year. The market regulator’s action comes amid allegations of misleading disclosures and manipulated financial statements.

Unexplained Stock Surge

BGDL’s share price skyrocketed from ₹16.14 in November 2023 to ₹1,702.95 by November 2024, a staggering 10,451% increase. SEBI's interim order attributed this steep rise to questionable practices, including manipulated disclosures and suspicious preferential allotments.

Shift in Shareholding Pattern

Initially, BGDL had five promoters holding 16.77% of its shares as of June 2020. However, by September 2020, the company disclosed 100% public shareholding, with no promoter holdings. A significant management overhaul in December 2023 was followed by two rounds of preferential share allotments in 2024, leading to 99.5% of the shareholding being concentrated in the hands of 41 individuals, categorized as "public" shareholders.

Allegations of False Announcements

In October 2024, BGDL announced the establishment of six subsidiaries across industries such as aerospace, agro-technology, and mining. Subsequently, the company disclosed securing high-value contracts from reputed firms, including Reliance Industries, TATA Agro, and McCain India. Additionally, a Dubai-based subsidiary claimed to have secured orders worth ₹251 crore.

These announcements coincided with a sharp rise in BGDL’s stock price from ₹642 on October 29, 2024, to a 52-week high of ₹1,702.95 by November 28, 2024.

Insider Selling and Profit Manipulation

Between November and December 2024, thirteen preferential allottees sold shares worth ₹271 crore at inflated market prices, realizing profits of approximately ₹269 crore. The shares, initially allotted at ₹10, were sold at prices significantly boosted by the company’s announcements.

Questionable Financials

SEBI's investigation revealed discrepancies in BGDL’s financial statements. Until FY23, the company reported negligible revenue, assets, and cash flow. However, its financials for the March 2024 quarter showed a sudden spike in revenues and expenses, despite negative operating cash flows and minimal fixed assets.

SEBI’s Verdict

In its interim order, SEBI described BGDL’s actions as a "well-planned fraudulent scheme" aimed at manipulating stock prices for profit. The regulator emphasized the responsibility of listed companies to maintain transparency and protect investor trust.

SEBI’s suspension of trading in BGDL’s shares is part of broader action against the company and 46 individuals involved in the alleged fraud.

Efforts to seek comments from BGDL went unanswered.