JSW Cement’s IPO hits Sebi wall over show cause notice to promoter Jindal family

JSW Cement’s IPO hits Sebi wall over show cause notice to promoter Jindal family

JSW Cement Ltd’s Rs 4,000-crore initial public offering has hit a roadblock, as the Securities and Board of Exchange of India (SEBI) has put the approval process on hold due to an old case involving Sajjan Jindal, who controls the cement maker, and his siblings, people familiar with the development said.

SEBI is examining an alleged regulatory violation involving the inter-se transfer of investments held by Hexa Securities and Finance Co., in which several Jindal family members, including JSW Group chairman Sajjan Jindal, were holding director positions, the people said, requesting anonymity.

The IPO approval process of the cement-making arm of the JSW Group may remain on hold till a settlement application, filed by Sajjan Jindal and other members of the Jindal family in response to the show cause notice, is resolved by the regulator, people cited above added.

One of the people cited above said that JSW Cement could have waited for a resolution and then filed the share sale documents with Sebi or do both in parallel, adding that the company chose to go ahead with the second option.

Sebi puts share sale offer documents on hold when there are pending proceedings against the company or its promoter. Moneycontrol could not ascertain when the alleged transfer of investments occurred. The transfer came under regulatory scrutiny when Hexa Securities’ parent, Hexa Tradex Ltd (HTL), filed for voluntary delisting, and some shareholders complained to Sebi about the terms of the delisting.

An email sent to the JSW group spokesperson did not elicit a response till the time of publication. SEBI did not immediately respond to an email seeking comment. According to its policy stated on its website, the regulator does not disclose reasons for delaying IPO approvals. This article will be updated if a response is received later.

According to the draft offer document of JSW Cement, a show cause notice dated March 18, 2024, was issued to Hexa Tradex, a member of JSW Cement’s promoter group, and its directors as well as Sajjan Jindal, and certain other members of the Jindal family, including Prithvi Raj Jindal, Naveen Jindal and Ratan Jindal.

“Such show cause notice was issued for transactions involving Hexa Tradex, including the transfer of investments held by Hexa Securities and Finance Co. Ltd (a subsidiary of Hexa Tradex) to certain Promoter Group entities, for the purpose of realignment and reorganisation within the group. One of our Promoters, Sajjan Jindal and Prithvi Raj Jindal, a member of our Promoter Group on account of being a director on the board of HTL have been named in the show cause notice for allegedly aiding and facilitating such transactions and violating, among others, the provisions of the SEBI Act, 1992, and the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003,” the JSW Cement DRHP noted.

Sajjan Jindal and certain members of the promoter group have submitted their replies dated June 24 to SEBI, contesting the show cause notice, and they have also filed settlement applications dated May 16 to bring an “expeditious closure” to the matter.

“While the matter is currently pending with SEBI, any unfavourable outcome could adversely impact our reputation or ability to undertake capital market transactions,” the DRHP noted.

Additionally, a show cause notice dated October 17, 2023 was issued to Hexa Tradex and other JSW Cement promoter group entities for violating delisting regulations.

“The Promoter Group Entities had made an initial public announcement for voluntary delisting of equity shares of HTL. The show cause notice alleged inter alia that HTL passed an incorrect board resolution and the Promoter Group Entities had made incorrect disclosure in the detailed public announcement, by failing to disclose the details of a proceeding initiated by SEBI against HTL and some of its promoters, for inadvertent classification of a promoter entity of HTL as a public shareholder in the past.

In a June 18 order, SEBI imposed a penalty of Rs 5 lakh each on Hexa Tradex and other promoter group entities.

“HTL and the Promoter Group Entities have paid the penalty and are in the process of filing appeal(s) against the Order before Securities Appellate Tribunal,” the DRHP noted.