SEBI bans agri-investment platform Growpital from collecting money from investors

Cracking the whip on unauthorised investment schemes by an agricultural investment platform, SEBI has barred Farm Tech Silo LLP, also known as Growpital, related entities and their directors from collecting money from investors and prohibited them from the securities market till further directions.

Also, they have been directed to ”cease and desist” from floating any collective investment scheme (CIS) directly or indirectly in any manner. Additionally, they have been stopped from collecting money from partners or investors through existing schemes.

These directions will be in force until further orders, the Securities and Exchange Board of India (SEBI ) said in an interim order passed on Monday.

Reacting to SEBI’s order, Growpital founder Rituraj Sharma said the company is actively addressing the situation with utmost seriousness and transparency. It is reviewing details with the legal team and is fully committed to cooperating with SEBI.

In its probe, the regulator found that Growpital is a platform that is offering various investment plans to the public in the agricultural sector. It also claimed to offer fixed tax-free profits in the range of 11 to 14 per cent through investments in the agriculture sector.

When an investor invests through the Growpital platform, the investor becomes a partner in a Limited Liability Partnership (LLP) and the amount invested is treated as capital contribution to the LLP. It was revealed that multiple LLPs have been incorporated for this purpose, prefixed with the name of ZF Project — ZF Project 1 LLP, ZF Project 2 LLP and ZF Project 3 LLP.

As per the bank statement of Growpital, over Rs 184 crore has been mobilised from various sources as of December 31, 2023, SEBI found.

”The activities of Growpital…show that prima facie a CIS is being operated. However, no material is available on record to indicate that any of the entities involved in the instant arrangement has formed a Collective Investment Management Company that has obtained a certificate under CIS Regulation,” SEBI said.

The regulator said the amount of money, prima facie, observed to have been mobilised in the Growpital escrow account of over Rs 184 crore indicates the magnitude of the prospective threat of investors getting lured to the unregistered activities being carried out by the entities.

”In order to ensure that additional funds are not mobilised through the Growpital platform under its scheme/ arrangement/plans and to safeguard the assets acquired from the funds of the investing public until full facts and materials are brought out and final decision is taken in the matter, I am of the view that pending completion of the detailed examination initiated by SEBI, there is a need to pass an ad-interim ex-parte order to protect the interests of investors at large,” SEBI Whole Time Member Amarjeet Singh said.

”If an ex-parte ad interim order is not passed at this stage, many prospective investors may get lured with the promise of assured returns and potentially part with large contributions resulting in irreparable injury to them. The upcoming plans as disclosed by Rituraj Sharma, including a ‘pre-IPO’ equity funding round, raise additional concerns that other potentially unregulated activities may be undertaken in future,” he added.

Accordingly, SEBI has barred Farm Tech Silo LLP, also known as Growpital, ZF Project LLP 1, ZF Project LLP 2, ZF Project LLP 3, Yotta Agro Venture Private Limited and the directors or designated partners of these entities — Rituraj Sharma, Gayatri Rinwa and Krishna Sharma.

Further, they have been prohibited from diverting any funds collected from partners or investors.

Also, the regulator has directed Cashfree Payments India not to accept any payments made through Growpital or on behalf of Growpital. Further, no funds will be transferred to the escrow account of Farm Silo Tech LLP or Growpital, which has extensive social media presence, until further orders.

”As a CEO, we take this seriously and are reviewing details with our legal team. We’re fully committed to cooperating with SEBI ensuring a comprehensive resolution in line with regulatory guidelines. Our priority is to protect investors’ interests and maintain trust,” Sharma said in a statement.

”We appreciate the partners’ understanding. It’s important to note that there have been no defaults on partner profit payouts to date, and partnership cancellations have been seamless.

”We’re in the process of requesting SEBI to unfreeze accounts for business continuity, crucial for partner payouts, farm operations, and supporting over 4,000 Krishiveer (Farmer) families, 100+ office employees, and collecting sales proceeds from the market against the farm produce sold. Ongoing transparency efforts include regular communication through webinars and meetups with investors,” he added.