The Securities and Exchange Board of India (Sebi) has ordered Vaswani Industries to give a withdrawal option to all retail and high net worth investors who had subscribed to the company?s initial public offer (IPO).
The company has been asked to keep open the withdrawal option for a period of 10 days. Simultaneously, the regulator has barred Rikhav Securities to act as a syndicate member or sub syndicate member for all the forthcoming issues till further directions. Additionally Bajaj Consultants and its group entities have been directed to cease and desist from bidding in an objectionable manner till further directions. Sebi will also examine in detail the role of other sub syndicate members more particularly Motilal Oswal Securities Limited, Karvy Stock Broking Limited and Enam Securities Private Limited for abusing the bidding process.
The regulator said that Rikhav Securities has inflated the bid book to a large extent and induced the investors to subscribe to the issue by placing large orders on behalf of the applicants during the first two days and then withdrawing and cancelling those bids. Sebi will also further examine the role of Ashika Capital Ltd, the book running lead managers to the issue as one of its group entities, Ashika Stock Broking were also involved in placing large bids in similar manner and subsequently withdrawing. ?Prima facie, it raises serious doubts about the genuineness of the intention of such applicants,? observed the Sebi order. As a result, 69.26% (almost 3 times of the issue size) of the total applications received was not considered for allotment. This is in marked deviation from the normal behaviour associated with public offers, and seemed to be very unusual.
The listing of the Rs 49 crore IPO was stayed following Sebi?s inquiry in to the alleged manipulation during the issues book building process. The IPO came under the regulatory scanner after it received various complaints from investors regarding huge withdrawal and rejections of applications after the closure of the issue. Investors alleged that they were misled by the huge subscription level in the issue before its closure.
A SEBI investigation in to the rejections or withdrawals after the closure of the issue revealed that certain applicants had adopted various methodologies for withdrawing their bids. They had given stop payment instructions and also ensured that their cheque was returned due to insufficient funds by making investment which exceeded their funding arrangement with banks.
The IPO was subscribed 4.16 times on its last day. The HNI portion of the issue was subscribed 11.29 times, the retail category was subscribed 6.83 times while the Qualified Institutional Buyers (QIB) category remained under subscribed to the extent of just 16% at the time of closure of the issue on May 3, 2011. ?After considering the cheque returns and technical rejections instances, the subscription to the issue dropped to 1.28 times,? Sebi said in its order.