Sebi panel set to recover gains from IPO scamsters

Written by Press Trust of India | Mumbai | Updated: Dec 30 2009, 05:48am hrs
Scamsters gained Rs 95.69 crore by rigging IPOs between 2003 and 2005, a regulatory panel has found and suggested recovering this amount and distributing it among affected investors. The value of frozen shares of these scamsters in the depositories worked out to be Rs 147.85 crore and the balance in their bank accounts frozen by CBI stands at Rs 1.2 crore as on October 31, 2007, the Justice Wadhwa Committee said.

The committee, set up by market regulator Sebi to investigate irregularities in IPOs floated during 2003-2005, suggested the possibility of recovering this amount and distributing it among the deprived applicants. "The quantum of unjust gains based on allotment to... accounts is approximately Rs 95.69 crore...value of the holdings in the frozen demat accounts in both NSDL and CDSL of the key operators and financiers as on October 31, 2007 works out to be about Rs 147.85 crore. The balance in the bank accounts of operators/financiers frozen by CBI is Rs 1.2 crore," said the report.

The scam in 21 IPOs, including Jet Airways, NTPC, IDFC, TCS, Yes Bank, Gokaldas Exports, ILFS Investsmart, Suzlon Energy and Shoppers' Stop, related to alleged cornering the shares reserved for retail investors by scamsters through opening of fictitious accounts.

The committee said for the purpose of payment to the deprived retail applicants, the amount which is the difference of closing price of shares on the first day of listing/trading at NSE and the IPO issue price will be considered. "These applicants will not be entitled for the market price movements subsequent to the listing," said the report of the committee, headed by former Supreme Court judge DP Wadhwa. The committee recommended that those who did not get any shares should be reallocated money equally from the recovered amount, till they each receive the gains from minimum shares allotted to the lowest category in the IPO.

Once that number is reached, any left-over money shall spill over" and reallocated to the partly successful applicants, the committee said. Former Finance Minister P Chidambaram had assured Lok Sabha that steps would be taken to reallocate shares to persons who had lost out on allocation of shares on account of the IPO scam.