India’s capital market regulator is reviewing the initial public offering process to stop companies from raising funds using falsified information, after seven firms were found to have violated rules.
The Securities and Exchange Board of India will take some “immediate measures” following its investigation into the seven IPOs, Chairman U.K. Sinha said today. The regulator barred the companies from raising more money from the capital markets, according to separate rulings posted on its website.
The latest ruling is part of the authorities’ move to raise corporate governance standards in the $1 trillion market and attract more overseas investors. The SEBI order showed that the companies including Bharatiya Global Infomedia Ltd (IFM) (BGIL). and PG Electroplast Ltd (PGEL). failed to make full disclosures and misused the share sale proceeds.
“I am shocked at the audacity of the perpetrators of this offense,” Sinha said in an interview to Bloomberg UTV. “While the review of the initial public offer process may take some time, we will come out with some immediate measures in light of the learning we made from the investigations.”
Taksheel Solutions Ltd (TAKS)., Tijaria Polypipes Ltd (TPOL)., Brooks Laboratories Ltd (BKL)., Onelife Capital Advisors Ltd. and RDB Rasayans Ltd (RDBR). were the other companies barred from accessing public funds, according to the regulator’s statement. SEBI asked the companies to place the unutilized money from their share sales in an interest-bearing escrow account with a bank.
All seven companies dropped at least 5 percent at close in Mumbai today. PG Electroplast slumped 17 percent and Brooks Laboratories sank 10 percent. Onelife plunged 8 percent.
The companies have lost at least half their market value since their listing in the past six months.
Rakesh Bhhatia, chairman of Bharatiya Global, has been associated with three listed companies, the regulator said in the order. One of the companies, Pan India Corp., has fallen 98 percent since listing in 1994 and now trades at 45 paise. Another company, SRG Financial & Management Consultants Ltd., of which Bhhatia was chairman, no longer exists. He wasn’t available at his office in Noida, near Delhi, when called for comment.
Onelife Capital proposed to utilize 34 percent of its initial share sale money to set up offices for its portfolio management service business, without making “any arrangements,” to set up the business at the time of filing the final prospectus, the order said. During the IPO, Onelife Capital took a loan to set up the business, without notifying investors, SEBI said.
Sumit Gupta, an assistant vice president at Onelife Capital, declined to comment, saying the company is studying the order. Officials at the other six firms weren’t available to comment when Bloomberg News called their offices.
“This order should be a strong deterrent for such IPOs and the merchant bankers who handle them,” Prithvi Haldea, chairman of PRIME Database, which tracks initial share offerings, told Bloomberg UTV today.
The regulator also barred three investment bankers including Almondz Global Securities Ltd. (AGSL), Atherstone Capital Markets Ltd. and PNB Investment Services Ltd. which managed the share sales, for failing to check facts.
Vinay Mehta, chief executive officer of Almondz Global wasn’t immediately available for comment at his office in New Delhi, while Gurunath M Mudlapur, managing director, Atherstone Capital, didn’t answer two calls to his cellphone. J. K. Agarwal, chief operating officer at PNB Investment declined to comment.
“We want the market to be a place where rules of the game are followed,” SEBI’s Sinha said.
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