Sebi transfers officers probing IPO scam

Mehul Shah & Ashish Rukhaiyar
Mumbai, 15 December 2011

The Securities and Exchange Board of India (Sebi) has transferred quite a few officials who were probing irregularities done during initial public offers (IPOs).

The move has surprised many in the markets, as the regulator is in the midst of looking into subscription details and trading patterns of several recent issues. Sebi is probing the role of merchant bankers, brokers and companies after questions were raised over the way some recent public issues were subscribed, amid talk of a tacit understanding between merchant bankers and promoters, as well as post-listing fluctuations in stock prices.

“Sebi has transferred quite a few officials involved in IPO investigations. It’s a surprising decision,” said a source familiar with the developments.

When contacted, a Sebi spokesperson said the regulator “undertakes transfer of officers from time to time, according to the laid-down policies. A few officials who have completed their tenure in a particular department were transferred to another department. This exercise involved officials in various departments, including the investigations department”.

The subscription details would help Sebi get clues about the names of investors who subscribed to these issues. If the same people had applied in most issues, there could be a trend.

Similarly, looking into the trading pattern would indicate if there was a concentration of volumes from a particular segment of brokers. The trading volumes in newly listed companies were several times higher than the number of shares issued by companies in IPOs, indicating there could also have been some circular trading in these.

Shares of half the companies that came out with IPOs this year had fallen 30 per cent from their issue prices till on Wednesday, data compiled by the BS Research Bureau showed. Not just that, some of these stocks like RDB Rasayans, Taksheel Solutions, Bharatiya Global, Indo Thai Securities, Shilpi Cable, Paramount Printpackaging, Acropetal Technologies Brooks Laboratories and Servalakshmi Paper have slumped 84 per cent from their issue prices.

There are allegations that some of the promoters pre-sold their issues at a 30-50 per cent discount to operators to get subscriptions. And, once the stock was listed, operators scrambled to exit, leading to wild fluctuations in prices of these stocks.