Scanning IPO process, volatility on listing worrisome: SEBI

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Scanning IPO process, volatility on listing worrisome: SEBI

SEBI is lashing its whip once again and this time with an iron fist too. After the market regulator banned seven firms from fund raising for IPO violation, it is keeping a close watch on the IPO process.

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Excerpts from Markets Midday on CNBC-TV18 Watch the full show »

The Securities and Exchange Board of India (SEBI) is lashing its whip once again and this time with an iron fist too. After the market regulator banned seven firms from fund raising for IPO violation, it is keeping a close watch on the IPO process.

In an interview to CNBC-TV18, chairman UK Sinha said that SEBI is currently reviewing the entire process for initial public offering of shares. "We are currently reviewing the entire IPO process, including shortening the timeline for the entire process," he reiterated.

Worried about the volatility in IPOs on the listing day, SEBI is investigating all instances that had been brought to its notice.

"We have been receiving complaints about manipulation in the market and misstatements in the prospectus. For investigation, we went rather deep. We went even to the premises of the people and did some field inspection as well. The type of violations we noticed, for example, were that there were serious misstatements," he added.

Sinha also said that in some cases merchant bankers have failed to conduct proper due diligence.

In its biggest crackdown in five years since the NDSL scam, the regulator has banned seven companies, which recently raised funds in initial public offers, from further accessing the securities market and has also banned some merchant banks involved in these issues after investigations.

The companies include PG Electroplast , Brooks Laboratories , RDB Rasayans , Taksheel Solutions , Tijaria Polypipes , Onelife Capital Advisors and Bharatiya Global Infomedia .

Also read: Sebi cracks down on seven recent IPOs

Below is the edited transcript of his interview with CNBC-TV18's Latha Venkatesh and Ekta Batra. Also watch the accompanying video.

Q: Can you explain to us the backdrop for which the three merchant bankers and the seven IPO companies were punished? What exactly was the malpractice that you noticed?

A: We have been receiving complaints about manipulation in the market and mis-statements in the prospectus. For investigation, we went deep. We went even to the premises of the people and did some field inspection as well. There were serious mis-statements. 

Material facts like ICD being issued had not been provided. Some fictitious ICD had been issued. Some of the money, which was raised from the issue proceeds, was given to some other people. That was again used for financing those who had come into the IPO process. So, we found that there are serious instances of manipulations and avoidance of SEBI disclosure norms. After confirming ourselves that these things are happening, we took the action.

Q: Was the money, which was used, was given by early IPO applicants, the money which normally should have been explored?

A: Actually the money has come through a variety of channels. For example, in some cases, money has been raised through inter-corporate deposits. That money has been utilised for financing the IPOs.

IPO proceeds had been given back to the concerned people from whom this ICD were supposedly raised. That is why in one or two cases the investing officers have recommended that we should also raise these issues with other agencies such as Enforcement Directorate and Income Tax authorities. That is also being done.