Description

SEBI interim order dated May 14, 2025 imposing restrictions on Varyaa Creations Limited, its promoters, and Lead Manager Inventure Merchant Banking Services following irregularities found in the company's SME IPO process.

Summary

SEBI issued an interim order on May 14, 2025 against Varyaa Creations Limited (VCL), its promoters, and Lead Manager Inventure Merchant Banking Services Private Limited following the discovery of irregularities during a routine inspection of the company’s SME IPO process. VCL raised INR 20.10 Crore through its fixed-price IPO and listed on BSE’s SME Platform on April 30, 2024. The order imposes significant restrictions including freezing promoter shareholding, barring the company from accessing securities markets, and preventing the merchant banker from taking new assignments.

Key Points

  • SEBI conducted routine inspection of Inventure Merchant Banker Services and identified irregularities in Varyaa Creations Limited’s IPO process
  • VCL’s SME IPO raised INR 20.10 Crore entirely through fresh issue of shares
  • Company listed on BSE SME Platform on April 30, 2024
  • Inventure acted as Lead Manager to the issue
  • Total of 9 noticees involved: VCL, Inventure, and 7 promoters (Pooja Vineet Naheta, Sarika Amit Naheta, Kusum Naheta, Jaineshaa Naheta, Pari Naheta, Vineet Naheta HUF, Amit Naheta HUF)
  • IPO proceeds intended for: Capital expenditure for new showroom (INR 5.50 Cr), Purchase of inventory (INR 10 Cr), General corporate purpose (INR 4 Cr), Issue expenses (INR 0.60 Cr)
  • Public Issue Account cum Sponsor Bank Agreement dated April 02, 2024 entered with HDFC Bank as Banker, Bigshare Services as Registrar

Regulatory Changes

No new regulatory framework changes. This is an enforcement action under existing provisions of sections 11(1), 11(4), and 11B of the SEBI Act, 1992.

Compliance Requirements

For Varyaa Creations Limited (Noticee 1):

  • Completely restrained from accessing securities market, directly or indirectly, until further orders

For Promoters (Noticees 3-9):

  • All shareholding in Varyaa Creations Limited frozen until further directions
  • Affected promoters: Pooja Vineet Naheta, Sarika Amit Naheta, Kusum Naheta, Jaineshaa Naheta, Pari Naheta, Vineet Naheta HUF, Amit Naheta HUF

For Inventure Merchant Banking Services (Noticee 2):

  • Prohibited from taking up any new merchant banking assignments in securities market until further directions
  • For any pending assignments where Inventure is already engaged as Lead Manager, the issuer must appoint a Monitoring Agency to monitor use of proceeds regardless of issue size

Important Dates

  • April 02, 2024: Public Issue Account cum Sponsor Bank Agreement signed
  • April 12, 2024: Prospectus filed
  • April 30, 2024: VCL listed on BSE SME Platform
  • May 14, 2025: SEBI interim order issued
  • December 29, 2025: Order circular published

Impact Assessment

Market Impact:

  • High severity enforcement action affecting investor confidence in SME IPO segment
  • Frozen promoter shareholding prevents any promoter exits or transfers
  • Company effectively barred from raising capital through securities market

Operational Impact:

  • VCL cannot access securities market for any capital raising activities
  • Inventure’s merchant banking business significantly impacted - cannot accept new mandates
  • Existing clients of Inventure must appoint monitoring agencies, adding compliance costs
  • Promoters’ shareholding liquidity completely restricted

Precedent Value:

  • Demonstrates SEBI’s stringent approach to SME IPO irregularities
  • Sets warning for merchant bankers regarding due diligence responsibilities
  • Highlights importance of compliance with IPO disclosure and process requirements

Investor Protection:

  • Action taken to protect investors from potential fraudulent IPO practices
  • Monitoring agency requirement for Inventure’s pending assignments provides additional safeguards

Impact Justification

SEBI enforcement action involving market access ban for the company, freezing of promoter shareholding, and restrictions on merchant banker operations due to IPO irregularities