Vaswani listing to go ahead amid probe

Ashish Rukhaiyar & Palak Shah
Mumbai, 7 July 2011

This would come as good news to investors who put money in the initial public offer (IPO) of Vaswani Industries. The capital markets regulator is expected to give its go-ahead for the listing of shares during this month.

The IPO got stuck after a large number of investors withdrew their applications and the regulator launched a probe.

According to sources, while the listing will be allowed, the investigation into the matter by the Securities and Exchange Board of India (Sebi) will continue.
The listing is being allowed so that genuine investors are not made to suffer due to the regulatory probe that is in its final stages. Also, the Ahmedabad-based All Gujarat Investors Protection Trust (AGIPT), which had approached Sebi alleging irregularities in the Vaswani Industries IPO, has gone back on its stand, for unknown reasons.

However, sources say the investigation will go on, as dummy subscriptions were suspected in the IPO. Around 3,000 retail applicants withdrew their applications and several others were disqualified due to stop-payment of cheques after subscription closed for the Vaswani Industries IPO.

Sources say Sebi’s concerns emerge from fears that a majority of the applicants could be acting on behalf of a few big operators. In the recent past, the market regulator had initiated probes in the dealings of several IPOs as all the new listings of the current financial year and 70 per cent of those in 2010-11 are trading below their issue price. Experts believe the situation of dummy investors is similar to the IPO scam involving Rupalben Panchal, who operated multiple demat accounts and put in several applications.

“Allowing listing is fine. But the matter needs to be investigated and results declared to the public. Operators in the IPO market are running a racket with impunity, which has been proved by the recent sharp fluctuations in share prices post-listing,” said the head of a Mumbai-based stock broking firm.

It has been well over a month since the IPO of Vaswani Industries closed for subscription. The company planned to raise Rs 50 crore through its IPO by offering 10 million shares in a price band of Rs 45-49.

On the day the issue closed, the stock exchange website showed the institutional portion was subscribed 0.16 times, while that reserved for high net worth individuals and retail investors was subscribed 11.29 times and 6.82 times, respectively. While the issue price was fixed at the upper end of the band at Rs 49, shares were allotted to investors on May 10.

Meanwhile, Sebi received complaints alleging large-scale withdrawals by investors. Sebi investigations showed that the issue, which was earlier subscribed a total of 4.16 times, was subscribed only 1.28 times after the withdrawals. The subscription in the HNI category dropped to 0.84 times from the earlier 11.29 times. In all, 3,813 applications were withdrawn while two terminals contributed to around 60 per cent of the total withdrawals.