Interim Order in the matter of Varyaa Creations Limited

WTM/AB/CFD/CFD-SEC-4/31401/2025-26 SECURITIES AND EXCHANGE BOARD OF INDIA INTERIM ORDER Under Sections 11(1), 11(4) and 11B of the Securities and Exchange Board of India Act, 1992 In respect of:

Noticee No. Name of Noticee PAN / SEBI Registration No. 1. Varyaa Creations Limited AACCK6166A Inventure Merchant Banking INM000012003 2. Services Private Limited 3. Pooja Vineet Naheta AARPP9431B 4. Sarika Amit Naheta AALPJ6021B 5. Kusum Naheta AACPN3275A 6. Jaineshaa Naheta AJUPN7094A limited 7. Pari Naheta AJUPN7146B 8. Vineet Naheta HUF AAFHV8923C 9. Amit Naheta HUF AAJHA5174L (The aforesaid entities are hereinafter individually referred to by their respective names / Noticee no. and collectively as “Noticees”, unless the context specifies otherwise) In the matter of Varyaa Creations Limited Background 1. Varyaa Creations Limited (VCL/Company), having its registered office at 11, 3rd Floor, Kailash Darshan, Gamdevi, Mumbai, is primarily engaged in wholesale trading of precious metals, and manufacture and sale of jewellery. The Company came out with an Initial Public Offer (IPO) of equity shares and got listed on the SME Platform of BSE Ltd. (BSE) on April 30, 2024. Inventure Merchant Banker Services Private Limited (Inventure) acted as the Lead Manager to the issue.

Interim Order in the matter of Varyaa Creations Limited

2. SEBI, while carrying out a routine inspection of the activities of the Inventure noticed certain irregularities in the IPO process of VCL and initiated an inquiry in the matter. It was noted that initially First Overseas Capital Limited (FOCL) was to have acted as the Lead Manager to the issue. However, subsequent to certain observations made by BSE, Inventure was appointed as the Lead Manager. 3. The IPO, which was a fixed-priced issue, was priced at ₹150 per share and raised ₹20.10 Crore, by way of a fresh issue of shares. The details of the public issue made by VCL are given in the Table below: Name Varyaa Creations Limited Segment and Platform BSE SME Platform Issue opening date April 22, 2024 Issue closing date April 25, 2024 Issue type Fixed Price issue Issue Price INR 150/- per share Issue size (value) INR 20.10 Crore (Fresh Issue- Gross basis) Issue size (no. of shares) 13,40,000 equity shares No. of times the issue Retail Individual Investors-3.45 times was subscribed Non-Retail Investors- 3.47 times Market maker- 1 time Overall -3.33 times Date of Listing and Listing approval- April 29, 2024 Trading Approval Trading Approval- April 29, 2024 Date of commencement of Trading – April 30, 2024 Lock in details at the time of Category No. of Shares Lock in upto filling of Prospectus (date) Promoter & 24,50,000 May 14, 2025 Promoter 10,00,000 May 14, 2027 Group Total 34,50,000 4. The proposed utilisation of the proceeds from the public issue, as per the disclosure made in the Prospectus dated April 12, 2024 (Prospectus), filed by the Company, is given in the Table below: Interim Order in the matter of Varyaa Creations Limited

Objects Amount proposed to be utilized (₹ Cr) Capital Expenditure for the proposed new showroom 5.50 Purchase of Inventory 10 General Corporate Purpose 4 Issue Expenses 0.60 Total 20.10

5. During the course of inquiry, it was noted that a Public Issue Account cum Sponsor Bank Agreement dated April 02, 2024 (Escrow Agreement) was entered by the Company (VCL), Lead Manager (Inventure), the Registrar to the Issue (Bigshare Services Private Limited) and the Banker to the Issue (HDFC Bank). In terms of the Escrow Agreement, the issue proceeds were deposited into an escrow account maintained with HDFC Bank. The transactions recorded in the said issue account are given in the Table below: Date Particulars Withdrawal (₹ Cr.) Deposit Remarks (₹ Cr.) 26/04/24 to IPO Proceeds 20,10,00,000/- Proceeds 02/05/2024 from the public issue 30/04/2024 Maruti Corporation 5,00,00,000/- Transfers made on the 30/04/2024 Kaveri Corporation 4,00,00,000/-instructions of the LM 30/04/2024 Overseas Metal 5,00,00,000/-and Alloys Pvt Ltd. 30/04/2024 IPO related 42,91,060/- Transfer expenses towards IPO expenses 30/04/2024 Varyaa Creations 5,67,08,940/- Transfer to to 03/05/2024 Ltd. the VCL’s bank account Total 20,10,00,000/- 20,10,00,000/- 6. It can be noted from the Table above that more than 70% of the issue proceeds (₹14 Crore) were transferred to three entities directly from the escrow account on the day of listing (April 30, 2024). These transfers were effected based on instructions issued by the Lead Manager to HDFC Interim Order in the matter of Varyaa Creations Limited

Bank vide letter dated April 30, 2024 (Copy of the letter is placed as an Annexure to this Order). The stated purpose of the transfers, as per the aforesaid letter, was to cover issue management fees, underwriting and selling commissions, registrar fees, and other IPO-related expenses. A copy of the instruction was also marked to the Company by the Lead Manager. 7. As the above-mentioned transfers, purportedly made to cover issue-related expenses, were disproportionate to the issue-related expenses disclosed in the Prospectus, SEBI sought responses from the Company and the Lead Manager regarding these transactions, vide email dated May 09, 2025. 8. The Lead Manager replied on the same day and submitted that the transfer of funds to Kaveri Corporation, Maruti Corporation, and Overseas Metal and Alloys Pvt. Ltd., were made in furtherance of the objects of the issue as stated in the Prospectus—namely, purchase of inventory and general corporate purposes. 9. The Company, in its response submitted vide email dated May 09, 2025, however, failed to provide any explanation for the aforesaid transfers, and instead sought additional time, stating that its accounts team and statutory auditor were unavailable until May 14, 2025. 10. This request was denied by SEBI on the same day considering that the lock-in period on a portion of the promoters' shareholding was set to expire on May 14, 2025. 11. The Company was advised to submit its reply by May 12, 2025. The Company failed to submit its response by the said date and, instead, once again stated that its accounts personnel had not yet resumed work due to ongoing holidays. 12. In view of the explanation furnished by the Lead Manager—that the transfers to Kaveri Corporation, Maruti Corporation, and Overseas Metal and Alloys Pvt. Ltd. were made towards the objects of the issue—and considering that the funds were transferred directly from the public issue account on the instructions of the Lead Manager, without first being routed through the Company’s bank account, the bank statements of the recipient entities were sought from the respective banks.

Interim Order in the matter of Varyaa Creations Limited

13. The inquiry initiated in the matter is ongoing. As on date, only the bank statements of Kaveri Corporation and Overseas Metal and Alloys Private Limited have been received by SEBI. The observations from the analysis of the banks statements of the aforesaid two entities are given below: Kaveri Corporation 14. The observations from the analysis of the bank account of Kaveri Corporation maintained with Ahmedabad Brach of IDFC Bank are provided below: a. It was noted from the KYC documents that Kaveri Corporation is a sole proprietorship and the account was opened on February 02, 2024. The nature of business disclosed was ‘Agriculture. The registered address of Kaveri Corporation was F/18, Murudul Tower, 10 Kailesh Society, H K House Lane, Ashram Road, Navrangpura, Ahmedabad – 380009, Gujarat. b. Analysis of the bank statements of Kaveri Corporation revealed that an amount of ₹4.00 Crore was credited to the account on April 30, 2024, at 16:27 hrs, originating from the issue account of VCL maintained with HDFC Bank. Subsequently, the entire amount was withdrawn in cash on the same day at 16:43 hrs, within 16 minutes after the funds were received. The relevant portion of the bank statement is given below:

15. As stated earlier, the bank statement of Maruti Corporation is not available at this stage. However, analysis of Kaveri Corporation’s bank statement revealed that an amount of ₹5.00 Crore was received by Kaveri Corporation from Maruti Corporation on April 30, 2024, at 16:58 hrs. This corresponds to the same amount that was transferred to Maruti Corporation from the IPO proceeds earlier that day from the HDFC Bank account in Mumbai. The funds received from Maruti Corporation were subsequently withdrawn in cash by Kaveri

Interim Order in the matter of Varyaa Creations Limited

Corporation at 17:05 hrs on April 30, 2024. A snapshot of Kaveri Corporation’s bank statement reflecting this transaction is provided below:

16. From the analysis above, it prima facie appears that ₹9 Crore from the IPO proceeds was credited to the bank account of Kaveri Corporation and withdrawn in cash on April 30, 2024 - the very day the Company was listed. Overseas Metal and Alloys Pvt Ltd 17. On examining the statement of bank account of Overseas Metal and Alloys Pvt. Ltd. maintained with Ahmedabad Branch of Indian Bank, it was noted that ₹5 Crore was received from the issue account of VCL on April 30, 2025. Subsequently, on the next day (May 01, 2024), Overseas Metal and Alloys Pvt. Ltd. transferred ₹4,98,50,000 in two tranches of ₹2,49,25,000 to ‘transpaacific’. Extract from the bank statement of Overseas Metal and Alloys Pvt. Ltd. Is given below:

Further observations in respect of the above transfer is given in subsequent paragraphs. 18. The above fund flow is in clear variation to the disclosures made in the Prospectus, which stated that ₹15.50 Crore would be deployed towards the opening of a new retail showroom at Agra during FY25. As per the objects disclosed in the Prospectus, ₹5.50 Crore was to be allocated for capital expenditure and ₹10 Crore towards inventory. The Prospectus further disclosed an agreement with Kalakriti, an Agra-based establishment, for the operation of a 300 sq. ft. jewellery section. Interim Order in the matter of Varyaa Creations Limited

19. No disclosure was made regarding any payment to Kaveri Corporation, which is a sole proprietorship based in Ahmedabad, Gujarat, engaged in agricultural activity, or Overseas Metal and Alloys Pvt. Ltd., also based in Ahmedabad. The absence of any business connection between the stated Agra showroom and the Gujarat-based Kaveri Corporation and Overseas Metal and Alloys Pvt. Ltd, coupled with the immediate onward transfer or withdrawal of funds in cash, undermines the explanation offered and casts serious doubt on the authenticity and purpose of these transactions. 20. The aforesaid acts which prima facie appear to have been undertaken by the Lead Manager in cahoots with Company attract the provisions of Section 12A(a),(b) and (c) of the SEBI Act and Regulation 4(1) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practises related to the Securities Market) Regulations, 2003. 21. It may also be noted in this regard that a similar modus operandi was prima facie observed in the Initial Public Offering of Synoptics Technologies Limited wherein SEBI passed an Interim Order dated May 06, 2025. FOCL, the Lead Manager who handled the IPO of Synoptics, was also initially appointed by the Company for the present issue. Further, as noted earlier in this Order, one of the recipient entities had transferred the funds received from the issue proceeds to an entity which could be identified from the bank statement as ‘transpaacific’. Incidentally, Transpaacific Shipping and Resources Private Limited, was one of the entities to which proceeds of IPO of Synoptics Technologies Limited were transferred on the instructions of FOCL. The links, if any, in this respect, need further examination. Need for Interim Directions 22. Given the prima facie findings set out above, interim directions are warranted in the matter for the following reasons: a. The lock-in period applicable to a portion of the promoters’ shareholding expires today, May 14, 2025, and there is a risk of the promoters offloading the shares held by them in VCL while the inquiry into the end-use of IPO proceeds is ongoing.

Interim Order in the matter of Varyaa Creations Limited b. The Company has approved a proposal in April 2025 to raise an additional ₹35 Crore through a rights issue. While material concerns regarding diversion of funds raised through the IPO remain unresolved, further fundraising from public shareholders cannot be permitted. It is surprising to note that VCL has now planned to raise an amount that is far more than the amount already raised from the public, within 13 months from its IPO. c. The funds transferred to third parties in the guise of issue related expenses on the instruction of the Lead Manager account to over 71% of the IPO proceeds, which is much higher than the issue related expenses disclosed in the Prospectus. Given the same, Inventure needs to be restrained from taking up new assignments as a Lead Manager, pending conclusion of the inquiry in this matter. 23. The balance of convenience lies in restraining the promoters from offloading their shares and restricting the Company from taking further corporate actions, rather than risking irreparable harm to public investors and market confidence. Further, the role of the Lead Manager, on whose instructions, the funds were transferred out of the issue account to entities which prima facie appear to be not connected to the Company, also requires further inquiry. 24. On a concluding note, it has to be mentioned that over the past year, SEBI has had to repeatedly intervene in cases, especially in the SME segment, where IPO proceeds were misutilised or siphoned off. The task often feels Sisyphean—but when confronted with facts that strike at the very heart of investor protection and market integrity, SEBI’s hands are forced. Inaction is not an option. 25. The stock exchanges, BSE and NSE, are advised to take note of SEBI Orders passed in respect of companies which got listed on the SME Segment, and exercise due care and diligence while permitting listing. Instances like the present one, where the Company barely got access to 30% of the issue proceeds cannot definitely be in the interest of the investors in the securities market.

Interim Order in the matter of Varyaa Creations Limited

Order 26. Keeping in view the foregoing factual deliberations recorded in the preceding paragraphs and in order to protect the interests of shareholders of VCL and and the integrity of the securities market, I, in exercise of the powers conferred upon me under Sections 11, 11(4), and 11B(1) read with Section 19 of the SEBI Act, 1992 hereby issue, by way of this interim order, the following directions, which shall be in force until further orders: - (a) The shareholding of the Noticees 3 to 9 in Varyaa Creations Limited shall stand frozen till further directions. (b) Noticee 1 is restrained from accessing the securities market, either directly or indirectly, in any manner whatsoever until further orders. (c) Noticee 2 shall not take up any new assignment relating to merchant banking activities in the securities market till further directions from SEBI. (d) In respect of any pending assignments where Noticee 2 is already engaged as a Lead Manager as on date of this Order, the issuer shall appoint a Monitoring Agency to monitor the use of proceeds irrespective of the issue size. 27. The foregoing prima facie observations contained in this order, are made on the basis of the material available on record. The Noticees may, within 21 days from the date of receipt of this Order, file their reply/objections, if any, to this Order and may also indicate whether they desire to avail an opportunity of personal hearing on a date and time to be fixed in that regard. 28. The above directions shall take effect immediately and shall be in force until further orders. 29. A copy of this Order shall be served upon Noticees, Stock Exchanges, Registrar and Transfer Agents and Depositories for necessary action and compliance with the above directions.

DATE: MAY 14, 2025 ASHWANI BHATIA PLACE: MUMBAI WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA

Interim Order in the matter of Varyaa Creations Limited

Annexure

Interim Order in the matter of Varyaa Creations Limited