Merchant banker JM Financial has received an administrative warning from capital market regulator Sebi over its role in the initial public offering of one of its clients - Western Carrier - a company filing said on January 3. Shares of JM Financial are lower by nearly two percent to day's low.
Sebi's letter has raised concerns over the fact that the approval of the board and shareholders regarding increase in authorized share capital of Western Carrier was taken while the issue was already open for subscription. "Ideally, the approvals for incremental authorized share capital should have been taken prior to opening of the issue and not after opening of the issue," Sebi said in its obeservation.
JM Financial and Kotak Mahindra Capital were the lead managers to the public issue. The lPO of WCL as per the RHP dated September 07 ,2024 comprised of fresh issue component of upto Rs 400 crore and an offer for sale component of upto 54 lakh shares.
The regulator in its letter cited norms that require the book running lead managers (BRLM) to exercise due diligence about all aspects of the issue including disclosures in the offer document, and said the non-compliances have been viewed 'very seriously'.
"The facts and circumstances of the case indicates that the BRLMs have failed to exercise due diligence since the shortfall in authorized share capital of the company came to the notice only after opening of the issue for subscription and the approvals for incremental authorized share capital were taken thereafter," Sebi said in its letter.
Sebi warned the BRLMs to be 'careful in future and improve their compliance standards to avoid recurrence of such instances,' else action may be initiated as per rules. The letter from Sebi was dated January 1, after received on January 2, said the merchant banker.
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