MUMBAI: Markets regulator Sebi has uncovered major irregularities in the IPO process of some merchant bankers, adding that it has found three cases of inflating subscription numbers to lure investors.
Sebi Chairman Madhabi Puri Buch said the regulator had found evidence that commercial bankers helped “increase the number of IPO applications to give the impression of high number of subscriptions”. She said Sebi is examining IPO-related data and will take appropriate action to end such practices. She said there could be some changes to policies related to public offerings.
Explaining the approach, sources said that the merchant bankers along with a number of investors filed for IPOs in large numbers and recorded high subscriptions in the first two days of the offering. However, these erroneous applications were rejected when examined before the final accounts and allocation were published. The initially high IPO numbers attract a large number of investors who want to make quick money by listing on the stock exchange.
By searching the data, Sebi has identified the merchant bankers involved in such forgeries. There are “names that often come up in such misconduct,” she said. “Therefore, in the interest of investors, we need to both review the policies and take enforcement action,” said Puri Buch.
The Sebi chief's comments came amid a surge in the number of IPOs in recent years. Between 2021 and 2023, there were 161 IPOs that collectively raised around Rs 2.3 million. In comparison, there were a total of 57 issues between 2018 and 2020, raising about Rs 70,000 crore, official data showed.
Sebi is also searching data to weed out 'mule accounts' – demat accounts of people used by unscrupulous entities to trade in the market, leaving no trace of the actual beneficiaries.
The Sebi chief was speaking at an event organized by the Association of Investment Bankers in India. At the same conference, Sebi senior member Anant Narayan G said the regulator is working on making some changes in rules for AIFs to allow them to pledge shares of investee companies to raise funds, at least for infrastructure companies. Such steps could help accelerate capital formation in the economy, he said.
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