SEBI bars Varanium Cloud, promoter for seven years, orders ₹128.8 crore disgorgement
India's market regulator has barred Varanium Cloud Limited (VCL) and its promoter and Managing Director Harshawardhan Hanmant Sabale from the securities market for seven years, following a probe into fabricated business operations, manipulated financial statements, and the diversion of investor funds. The Securities and Exchange Board of India (SEBI) also ordered Sabale to disgorge ₹128.77 crore in alleged unlawful gains and directed the company to return ₹62.51 crore that was diverted from IPO and rights issue proceeds, along with 12% interest.
The penalty and disgorgement orders
In a 155-page final order passed on Tuesday, SEBI imposed fines totalling ₹33.08 crore on Varanium Cloud, Sabale, and seven others. The company was fined ₹1.3 crore, while Sabale was fined ₹20.4 crore. Raj Jagtani, proprietor of BM Traders, was fined ₹10.1 crore and barred for four years. Athos Capital Advisors and its director Jinesh Mehta were each fined ₹50 lakh and barred for two years. Executive directors Vinayak Vasant Jadhav and Fahim Iunus Shaikh, and Chief Financial Officer Mukundan Raghavan, were each fined ₹6 lakh and barred from the market for one year. First Overseas Capital Ltd, the lead manager to VCL's IPO, was fined ₹10 lakh and barred for two years, with the debarment running concurrently with an earlier debarment imposed through an order dated October 23, 2025.
Sabale was also restrained from associating with any listed company or a SEBI-registered intermediary as a director or key managerial person for seven years. The disgorgement order requires Sabale to repay ₹128.77 crore in unlawful gains, which SEBI calculated as the promoter group's total gains from share sales. Of this, ₹111.52 crore was attributed to Sabale and ₹17.25 crore to Varanium Networks Pvt Ltd, an entity in which Sabale held a 99.99% stake.
Diversion of IPO and rights issue proceeds
SEBI's probe centred on VCL's IPO in September 2022 and a subsequent rights issue. The IPO raised ₹40.39 crore, which the company said would be used to establish containerised Edge Data Centres and Digital Learning Centres. The following year, a rights issue raised ₹48.45 crore. According to SEBI, 89.83% of the rights issue proceeds were diverted to promoter-related entities, including ₹32.73 crore transferred directly to Sabale's personal bank account.
The regulator found that VCL's funds were moved to related parties and entities such as VNPL, VEPL, and BM Traders. It also reported that 47.03% of the IPO proceeds were sent to entities with which VCL had no business relations. The regulator directed VCL to bring back ₹62.51 crore, comprising ₹18.98 crore from IPO proceeds and ₹43.53 crore from rights issue proceeds, along with 12% interest from the respective dates of debit transactions.
Fabricated operations and fictitious revenues
SEBI's findings also highlighted VCL's claims about its data centre infrastructure. The company announced that it had commissioned Edge Data Centres in Goa and Sawantwadi. However, inspections by SEBI and the National Stock Exchange reportedly found no facility at the registered address of the Sawantwadi centre. The purported Goa facility consumed only six units of electricity in a month, indicating that the technology-intensive operations were not taking place, according to SEBI. The regulator also noted that VCL's primary vendor associated with the projects did not possess the fixed assets required to execute them.
SEBI found evidence of financial manipulation through fictitious sales and purchases, with reported transactions often supported mainly by journal entries rather than adequate underlying evidence. The company reported sales of ₹594.32 crore attributed to Amtelfone Incorporated across two financial years, which the regulator said were only ledger entries and not backed by actual banking receipts. In the third quarter of FY24, VCL reported consolidated revenue of ₹395.15 crore while standalone revenue was ₹3.04 crore, implying ₹392.11 crore from its US subsidiary Varanium Cloud INC. However, that subsidiary had only $1,000 in capital and no employees.
Share price surge and acquisition announcement
SEBI also scrutinised VCL's public announcements. In February 2023, the company announced a proposed acquisition of Fastway Transmissions Pvt Ltd for ₹2,683 crore, which was nearly 20 times VCL's net worth. A portion of the purchase price was to be funded through a ₹1,250 crore preferential issue. The regulator found that the deal did not go through, and concluded that the announcement was a ploy to mislead investors into providing fresh capital through the preferential issue.
VCL's share price rose sharply after its listing, from ₹131 on 27 September 2022 to ₹1,526.15 on 13 January 2023, before falling to ₹17.75 by 31 May 2024. SEBI said that Sabale and Varanium Networks sold shares during this period, making unlawful gains at elevated valuations.
Implications
The seven-year bar on VCL and its promoter, coupled with the disgorgement and recovery orders, represents a significant action by SEBI against a listed entity and its management. The company did not immediately respond to requests for comment.
As reported by CNBC-TV18, Livemint, and Lokmat Times, the regulator has taken a strict view of the alleged misuse of investor funds and the distortion of the company's financials. The agency order also shows that SEBI paused from media reports, leading to a preliminary examination, an interim order in May 2024, a confirmatory order in October, and a detailed probe into the alleged violations.