Bloomberg News

‘Shocked’ Indian Regulator to Review Initial Share Sale Rules

January 03, 2012

Dec. 29 (Bloomberg) -- 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. and PG Electroplast Ltd. 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., Tijaria Polypipes Ltd., Brooks Laboratories Ltd., Onelife Capital Advisors Ltd. and RDB Rasayans Ltd. 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.

Shares Slump

PG Electroplast and Onelife slumped as much as 20 percent in Mumbai trading today while Brooks Laboratories fell 11 percent. Tijaria Polypipes, Taksheel Solutions and Bharatiya Global also fell.

Sumit Gupta, an assistant vice president at Onelife Capital, declined to comment immediately, 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,” said 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., Atherstone Capital Markets Ltd. and PNB Investment Services Ltd. which managed the share sale, 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.

--With assistance from Rakteem Katakey in New Delhi. Editors: Arijit Ghosh, Vipin V. Nair

To contact the reporters on this story: Rajhkumar K Shaaw in Mumbai at rshaaw@bloomberg.net; Anto Antony in New Delhi at aantony1@bloomberg.net

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net


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