The minister of state for Finance Mr NamoNarainMeena informed Parliament that SEBI had widened its scope of investigation to cover 19 companies. These companies had tapped the capital markets in 2011. SEBI has already issued an ex-parte order against seven companies on the 28th of December 2011. The important thing in all these issues, seven against whom the order has been passed and 19 which are under investigation is the fact that they were overpriced and their valuations seemed unjustified. These issues apparently managed subscription. Majority of these issues saw huge price volatility on listing day and a few of them saw volatility continuing into listing day. The final outcome of all these issues was that investors who applied for these issues were by and large stuck in them. More important these issues saw the primary market getting into a comatose and virtually for a period of six months from October 11 to March 12 there were just two issues of which one Goodwill Hospital withdrew and the other MCX was a success.
The order of 28th December 2011 needs to be followed up on as there were many directives like depositing IPO proceeds in an escrow account and in some cases even the merchant banker’s license being cancelled. One would expect SEBI after four months to give an update on which of those seven companies have complied with the directives and which have yet to do so.
The list of 19 companies which are under the lens of SEBI is as follows: -
|Name of Issue||Issue Price||Current Price 27th April|
|2.||Acropetal Technologies Limited||90.00||13.50|
|3.||Birla Pacific Medspa Limited||10.00||5.52|
|4.||Fineotex Chemicals Limited||72.00||48.90|
|5.||Indo Thai Securities Ltd||74.00||10.26|
|6.||Inventure Growth & Securities Ltd||117.00||208.80|
|7.||Midvalley Entertainment Limited||70.00||8.35|
|8.||Paramount Printpackaging Limited||35.00||10.05|
|10.||Readymade Steel Limited||108.00||72.00|
|11.||Rushil Décor Limited||72.00||239.85|
|12.||Servalakshmi Paper Limited||29.00||4.92|
|13.||Shilpi Cable Technologies Limited||69.00||11.29|
|14.||Singhvi Forging &Engg Limited||85.00||69.95|
|16.||Sudar Garments Limited||77.00||59.95|
|17.||Timbor Home Products Limited||63.00||29.60|
|18..||Vaswani Industries Limited||39.20||8.03|
|19.||VMS Industries Limited||40.00||119.75|
The list shows that of the 19 issues only 4 are above their issue price. Of the remaining 15, as many as 9 issues or 60% have lost half or more than half of their value. The quality of issues which came to the market in 2011 was certainly below the mark and action by the regulator is really appreciated.