Market regulator Securities and Exchange Board of India (Sebi) and Vaswani Industries on Tuesday informed the Securities Appellate Tribunal (SAT) that both the parties have broadly reached an agreement in which Vaswani Industries would provide withdrawal option to retail investors up to a maximum of 15 lakh shares. Additionally, the company will come out with a bonus issue in the ratio of 1:4 post the withdrawal option in an attempt to restore confidence among investors in the company’s shares. As per the agreed terms, the promoters will not get any bonus shares. Both Sebi and Vaswani Industries have been asked to finalise and draft the terms of agreement and submit it before SAT on Thursday.
The case came up before SAT after the regulator on July 11 ordered Vaswani Industries to give withdrawal option to IPO investors alleging widespread manipulation during the issue’s book building process. The company was further directed to keep open the withdrawal option for a period of 10 days.. SAT however suggested Sebi and Vaswani Industries to workout a mutually-agreeable solution in a bid to keep alive the company’s maiden public offer of R49 crore. SAT felt that the company should not suffer due to mischief done by few market participants.
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 had alleged that they were misled by the huge subscription level in the issue and were allotted more shares than what they had expected at the time of bidding due to such withdrawals. According to the company’s submission before Sebi, 15 lakh shares were the additional shares allotted to retail investors on account of huge withdrawals of bids.
The R49-crore IPO, which was subscribed 4.16 times on the closing day fell to just 1.28 times after investors withdrew their bids. Sebi noted that investors had given stop payment instructions and issued cheques in excess of bank balances. Of the total bids for over four crore, investors withdrew close to three crore shares after the closure of the issue.