IPO fund diversion: Sebi bars Varanium Cloud, promoter for 7 years from markets

Sebi has barred Varanium Cloud and its promoter-managing director Harshawardhan Hanmant Sabale from the securities market for seven years after finding that the company misled investors, inflated its financials and diverted IPO and rights issue proceeds.

The regulator also directed Varanium Cloud to bring back Rs 62.51 crore, along with 12% interest, into the company’s account within three months. Sebi said the amount had been diverted from IPO and rights issue proceeds.

Sabale has also been directed to disgorge unlawful gains of Rs 128.77 crore, along with 12% interest from the date of sale of shares till the date of deposit. The amount has to be paid into Sebi’s Investor Protection and Education Fund within 45 days.


The final order was passed by Sebi Whole-Time Member Amarjeet Singh in the matter of Varanium Cloud. The case followed an interim order issued in May 2024 and a confirmatory order in October 2024. Sebi had taken up the matter after newspaper articles and media posts raised questions about the company’s affairs.

Varanium Cloud had raised Rs 40.39 crore through its IPO in September 2022. The company had said the money would be used mainly to set up containerised edge data centres and digital learning centres. In a statement of deviation filed with NSE in November 2023, it claimed that Rs 25.57 crore had already been used and that there was no deviation from the objects of the IPO.

Sebi found that the claim was misleading. The order said the company had claimed in its FY23 annual report that it had commissioned data centres in Panjim, Kudal and Mumbai. But in April 2024, the company told Sebi that the Mumbai data centre was yet to be launched. Site visits also raised questions on the existence and scale of the centres.

At the Goa site, NSE found that an “Edge Centre” was not available, though Varanium was operating from that location. Staff at the location were not aware of the edge centre. In Sawantwadi, Sebi said there was no containerised data centre at the given address. The company had earlier spoken of 125-plus employees in its Hydra BPO/KPO vertical, but the regulator found a mismatch between disclosures and ground-level observations.

The order also questioned a quotation from Avance Technologies Ltd for setting up three edge data centres and three digital learning centres for Rs 31.80 crore. Sebi noted that the value of the quotation exceeded Avance’s FY23 revenue of Rs 30.53 crore and that Avance had no fixed assets in its financial statements. Sebi said this should have raised doubts about Avance’s ability to execute such work.

The regulator also found diversion of public issue money. Out of the IPO proceeds, Rs 18.98 crore, or 47.03% of net IPO proceeds, was transferred to BM Traders, Turmeric Lifestyle, Varanium Earth and Varanium Lifestyle. Sebi said Varanium’s annual report did not show business relations with these entities.

The rights issue proceeds showed a bigger diversion. Varanium had raised funds through a rights issue in 2023, mainly to augment the Hydra BPO unit and working capital. Sebi found that Rs 43.53 crore, or 89.83% of net rights issue proceeds, was transferred to Sabale, BM Traders, Varanium Lifestyle and Varanium Earth. Of this, Rs 32.73 crore went directly to Sabale’s personal account.

Sebi said Varanium had not produced evidence to explain these transfers. It said neither the company nor the recipient entities were able to provide satisfactory justification for the movement of funds.