SEBI Reviews Inspection Findings and SCN Response for Swastika Investmart

The Securities and Exchange Board of India (SEBI) reviewed inspection findings and responses concerning SEBI-registered merchant banker Swastika Investmart Limited following an inspection covering the period from April 01, 2023 to March 31, 2025 [1].

Regulatory Inspection and Proceedings

SEBI conducted an inspection of Swastika Investmart Limited, a SEBI-registered merchant banker holding registration number INM000012102, between July 08, 2025 and July 11, 2025 [1]. The inspection evaluated operations spanning from April 01, 2023 to March 31, 2025 [1]. Based on the inspection findings and subsequent replies, prima facie observations of non-compliances were noted under various regulations, including the ICDR Regulations, MB Regulations, Intermediaries Regulations, SAST Regulations, PIT Regulations, and relevant circulars [1].

Following these observations, SEBI initiated adjudication proceedings and appointed an adjudicating officer on February 06, 2026, under Section 15-I of the SEBI Act, 1992, and Rule 3 of the Adjudication Rules [1]. A Show Cause Notice (SCN) dated March 18, 2026, was issued under Rule 4(1) of the Adjudication Rules to examine alleged violations under Section 15HB of the SEBI Act [1]. The merchant banker acknowledged receipt of the notice and submitted its reply on April 02, 2026 [1].

SME IPO Disclosures and Due Diligence

The merchant banker's reply addressed multiple SME initial public offerings (IPOs), including those of Aditya Ultra Steel Limited, TBI Corn Limited, and Service Care Limited [1]. Regarding director and key managerial personnel qualifications and experience certificates, the firm stated that disclosures relied on resumes and CVs verified by the respective companies due to non-availability of supporting documents at the time, and added that enhanced documentation procedures have since been established [1].

Concerning the objects of the issue, the merchant banker reported that working capital and capital expenditure estimates utilized internal company assessments, vendor proposals, and commercial quotations [1]. For instance, working capital requirements for TBI Corn Limited were estimated at ₹17 crore based on projected operations [1]. The firm also noted that formal site visit reports, geo-tagged or time-stamped photographs, and travel records were not maintained during earlier practices for certain SME IPOs, but such documentation requirements have since been introduced [1].

Other disclosures reviewed in the reply included contingent liabilities, corporate guarantees, customer concentrations, outstanding litigations based on legal advisor reports, and minor inconsistencies in corporate history references, with the company noting the implementation of strengthened verification frameworks and a Maker-Checker mechanism [1].

SEBI carries out periodic inspections of registered intermediaries, such as merchant bankers, to ensure compliance with capital issue disclosures, insider trading regulations, and investor protection standards.

Intermediary compliance and rigorous due diligence during SME initial public offerings are vital for maintaining market integrity and investor protection in the Indian securities market.

The adjudication proceedings could result in regulatory penalties or directives reinforcing tighter due diligence and documentation standards for merchant bankers handling SME IPOs.

The final outcome of the adjudication proceedings and any potential penalties under Section 15HB of the SEBI Act remain to be determined.