The Securities and Exchange Board of India (Sebi) is not done with its investigations relating to initial public offerings (IPOs). The capital market regulator will soon release a list of six to seven IPOs where rules on due diligence and use of proceeds were violated. Sources add the public issues of Rushil D?cor, Timbor Home, Indo Thai Securities and Flexituff International are among those under regula-tory scrutiny.
Persons familiar with the development told FE that Sebi has zeroed in on some companies and merchant bankers based in tier-II cities and is preparing an order that could be released as early as next week.?IPOs under investigation have brought to the fore the activities of a couple of market intermediaries operating from cities like Ahmedabad and Indore,? said a person privy to the developments. ?While the modus operandi is quite similar to the one highlighted in Sebi?s earlier order released in December, evidence has been found against new entities,? he explained.
One of the merchant bankers alleged to have indulged in malpractices is Ahmedabad-based Corporate Strategic Allianz. Interestingly, three of its IPOs ? Rushil D?cor, Timbor Home and Indo Thai Securities ? are being probed by the capital market watchdog.
Established in 2006, Corporate Strategic Allianz is a category 1 merchant banker registered with Sebi and according to its brochure, has handled takeovers, valuation reports and even a rights offering. According to market players, it is known to specialise in smaller offers.
The IPOs of Timbor Home and Indo Thai Securities, for instance, raised only around Rs 24 crore and Rs 30 crore.
While the Sebi probe has again revealed instances wherein the escrow account money was given to third parties as loans or even used as inter-corporate deposits (ICDs), it is believed that some compromises were done on the due diligence processes as well.
When contacted, Corporate Strategic Allianz managing director Ashok Shah said he has not received any letter or notice from Sebi in relation to an IPO probe. ?We have heard that a probe is on, but we have not received anything from Sebi. We have not done anything wrong,? he said.
This will be second time in quick succession that the market regulator is taking action on IPO violations. In December, Sebi barred seven companies, six merchant bankers and around 100 other entities (individuals and private investment firms) for alleged malpractices in initial public offers. Earlier in 2006, the then Sebi whole-time member G Anantharaman had come out with a landmark order on IPO irregularities that also included a disgorgement of Rs 116 crore. Current Sebi chairman UK Sinha has said on many occasions that the regulator is reviewing the entire IPO process to make it more efficient and robust.