The Securities and Exchange Board of India (SEBI) has issued an administrative warning to JM Financial for regulatory non-compliance during its client Western Carrier’s initial public offering (IPO).
The investment banking firm’s shares fell 2.3% to settle at Rs 129.90 on the NSE after it informed the stock exchanges about the SEBI letter on Friday.
In its letter, the markets regulator noted that the board of directors approved the increase in authorized share capital on September 15, while the customized logistics solution company’s public offering was already up for subscription on September 13.
Furthermore, shareholders approved the proposal at an extraordinary general meeting (EGM) on September 16. SEBI stated that ideally, both approvals for increased authorised share capital should have been obtained before the issue’s opening rather than subsequently.
JM Financial and Kotak Mahindra Capital served as the public issue’s book-running lead managers (BLRMs).
“The facts and circumstances of the case indicate that the BRLMs have failed to exercise due diligence since the shortfall in the authorised share capital of the company came to the notice only after the opening of the issue for subscription and the approvals for incremental authorised share capital were taken thereafter,” the regulator said in the letter dated January 1.
“The above non-compliances have been viewed very seriously. The BRLMs are, therefore, advised to be careful in the future and improve their compliance standards to avoid a recurrence of such instances, failing which action may be initiated,” SEBI warned.
Western Carrier’s public offer before it was available for subscription included a new issue of shares worth up to Rs 400 crore and an offer to sell up to 540,000 equity shares.
The failure in regulatory compliance was revealed when the lead managers sent an email to SEBI on September 17 requesting that an update to the red herring draft prospectus (DRHP) be uploaded to the regulatory website.
