DSIJ Mindshare

SEBI penalises companies, merchant bankers on IPO norm violations

The Securities and Exchange Board of India (SEBI) has banned 7 companies and 3 merchant bankers after they were found violating IPO norms. The SEBI investigated some IPOs after it received information of irregularities from various sources. The investigation was conducted in areas like disclosure of complete information in the offer document, proceeds of the IPOs that were diverted to wrong routes, violation on listing of the stock on the first day and other related matters.

The 7 banned companies are PG Electroplast, Brooks Laboratories, RDB Rasayans, Taksheel Solutions, Tijaria Polypipes, Onelife Capital Advisors and Bhartiya Global Infomedia. The 3 merchant bankers that have been barred from taking up new assignments are Almonds Global Securities, Atherstone Capital and PNB Investment Services. These firms and promoters cannot buy, sell or deal in the securities markets in the future. Today, the SEBI Chairman, UK Sinha made the following statement to a leading media house, “We are looking at the entire IPO process and the volatility on the listing day”.

We, at DSIJ, had clearly given an ‘Avoid’ call for most of the IPOs when they tapped the market (See table below). In any case, it is difficult to survive in an uncertain global environment, and we hold that these companies especially did not have strong business models and growth opportunities going ahead. We also believe some of the IPOs did not have strong management bodies and were highly priced as compared to their peers in the group.

The following table lists the 7 banned companies with each of their Offer Price, Current Market Price (CMP), Percentage Gain/Loss and our recommendation on them during our IPO Analysis:   

Sr. No Company  Offer Price Our Recommendation BSE Current Price % Change
1 PG Electro 210 Avoid 159.1 -24.24
2 Brooks Labs 100 NA* 13.4 -86.6
3 RDB Rasayans 79 Avoid 8.84 -88.81
4 Taksheel Sol 150 Avoid 14.1 -90.6
5 Tijaria Poly 60 Avoid 9.64 -83.93
6 Onelife Cap 110 Avoid 211.05 91.86
7 Bharatiya Global 82 NA* 8.47 -89.67
                                  * Not analysed by DSIJ

Except for Onelife Capital, all the 6 scrips are trading well below their respective offer prices. We still stick to our analysis of Onelife Capital, and expect the scrip to move southwards soon. In our Post Issue Analysis of Onelife Capital too, we had mentioned that a very high number of shares were traded on the day of listing, which signals towards some kind of speculative trade on the counter.

Gone are the days of 2006 and 2007, when most of the IPOs were listed at a premium and made a quick buck for investors. The IPO market had a very bad year in 2011, which was evident from the fact that of the total 38 IPOs in 2011, only 10 are currently trading above their respective offer prices. Most of the companies postponed their fund raising plans due to the uncertain macro environment.

Our advice to all our readers would be to look closely at the business of the company, its fund-raising objectives and its peer group's performance before investing in any IPO.

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