BRLMs of Electrosteels’ IPO likely to challenge Sebi order in SAT

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Mumbai | Published: April 8, 2016 6:10:15 AM

The book running lead managers (BRLMs) of Electrosteel Steels' (ECL) initial share sale are planning to challenge the orders passed by markets regulator Sebi in the Securities Appellate Tribunal (SAT).

The book running lead managers (BRLMs) of Electrosteel Steels’ (ECL) initial share sale are planning to challenge the orders passed by markets regulator Sebi in the Securities Appellate Tribunal (SAT).

The three merchant bankers, which were part of the initial public offering (IPO), will file an appeal against the Sebi’s order imposing a fine of Rs 2.5 crore on the merchant bankers of the issue and the company for non-disclosure of key information to investors during the IPO, sources told FE.

The Kolkata-based steel company launched its IPO in September 2010. SBI Caps, Edelweiss Financial Services and Axis Capital were the investment bankers for the issue. Sebi investigated the issue after it had received complaints from an anonymous investor against Electorsteel and BRLMs during the IPO.

Under scanner is an application that the company had filed with the Ministry of Environment and Forests (MoEF) in 2008, seeking an “in-principle” approval for diversion of forest land for Kodolibad iron ore mine. That the MoEF had rejected the application was not disclosed in the red herring prospectus (RHP).

“To begin with, Electrosteel as a company was never applied for an MoEF approval, it was the promoter of the company who had applied for the MoEF clearance. Secondly, it cannot be called a material development as MoEF is not a regulatory body but an advisory body,” said a senior investment banker who works with one of the book running lead managers. Further, the setback was an interim development as the application was subsequently approved by the state government, the investment banker said.

As per SEBI’s issue of capital and disclosure requirements, 2009, the RHP needs to contain “all material disclosures which are true and adequate so as to enable applicants to take an informed investment decision”. Events that need to be disclosed include developments pertaining to the company’s business and also relating to business and securities of its subsidiaries, group companies which may have a material effect on the issuer.

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