Enam, Kotak Said to Pay Investors Missing Record India IPO

Enam Securities Pvt. and Kotak Securities Ltd. are among Indian brokerages told to compensate about 12,000 investors who failed to get shares in the nation’s largest initial public offering, said five people with direct knowledge of the matter.

The capital markets regulator wrote to the investment banks that managed Coal India Ltd. (COAL)’s IPO, including Citigroup Inc. (C) and Bank of America Corp. (BAC), barring them from hiring the brokerages that failed to allot the shares until those retail investors are compensated, three people said, declining to be named because the information isn’t public.

About 1.6 million retail buyers bid for shares in state-run Coal India’s record 152 billion rupee ($3.4 billion) offering in October. The stock surged 40 percent on the first trading day in Mumbai after the world’s largest coal producer got bids for 15 times the shares on offer.

Some investors didn’t get shares they were eligible to receive because brokers uploaded the forms incorrectly on the stock exchanges’ websites, or applications were inaccurately filed, two people said.

About 5,000 investors’ complaints have been settled, and the brokerages are likely to resolve the remaining cases over the next few weeks, two of the people said.

The banks that managed the transaction included Deutsche Bank AG (DBK), Enam Securities, Kotak Mahindra Capital Co. and Morgan Stanley (MS), according to the share sale document.

Investment Banks

Debasis Ghosh, a spokesman for Citigroup; Mona Kwatra, a spokeswoman for Bank of America, and Phiroza Choksi, a spokeswoman for Kotak, all of whom are based in Mumbai, declined to comment. N. Hariharan, a spokesman for the Securities and Exchange Board of India in Mumbai, declined to comment.

The 10 brokerages included Edelweiss Capital Ltd. (EDEL), India Infoline Ltd., SMC Global Securities Ltd., JM Financial Ltd. and Religare Securities Ltd., two of the people said.

Religare has issued checks to 11 investors and is working to resolve the remaining cases, spokesman Samir Kapur said in an emailed statement.

Harshad Apte, a spokesman for India Infoline, and Raju Kane spokesman at Edelweiss, declined to comment. Vineet Goyal, a spokesman at SMC, and Manali Pilankar, a spokeswoman at JM, declined to immediately comment.

The eligible investors who had paid for the shares have been refunded their money, said an executive at one of the brokerages. Those investors are seeking compensation for losing the opportunity to profit from the stock’s rise, he said.

Shares of Coal India have climbed 38 percent from the IPO price of 245 rupees to trade at 338 rupees as of 3:12 p.m. local time today. The firms have been directed by the regulator to pay each investor 109 rupees for every share they were eligible to receive, the person said.

The regulator’s demand that investors be compensated was reported by the Economic Times earlier today, citing bankers it didn’t name. Brokers can also buy the shares for the investors from the secondary market, the newspaper said.

To contact the reporter on this story: Ruth David in Mumbai at rdavid9@bloomberg.net

To contact the editor responsible for this story: Philip Lagerkranser at lagerkranser@bloomberg.net

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