Seasoned investors know that SEBI, the strictest authority, overlooks the equity market. One wrong move and SEBI will catch you in legal action. Since it protects the interest of investors and traders, it becomes their authority to monitor the market. Recently, the market regulator found Ruchi Soya sending SMSes to advertise their follow-on public offer (FPO) issue. The company pitched FPO as a good investment opportunity via SMS to people. SEBI said the contents of these SMSes appear to be ‘misleading/fraudulent’ and not in accord with the ICDR (Issue of Capital and Disclosure Requirements) Regulations.
Why Did SEBI Take A Serious Call?
This is not the first time Baba Ramdev-led Patanjali has run into trouble with SEBI. Last year, the SEBI warned the yoga guru and the company for making dubious investment promises. There is a viral video of Ramdev asking his followers to buy shares of Ruchi Soya Industries if they want to become crorepatis.
The promoters or company directors cannot make statements asking people to buy their company shares. This is against SEBI’s rules. Any manipulation or price rigging falls under unfair trade practices and fraudulent activities. This is the biggest mistake any company can make before IPO, FPO or post-listing. SEBI bans these practices to maintain transparency, fairness and accountability in the stock market.
Should Investors Be Concerned?
SEBI ordered Ruchi Soya to allow investors to withdraw their bids. The window for withdrawal was available from March 28 to 30. The fate of the FPO remains doubtful as most foreign investors pulled out their bids. In total, 14,583 applications amounting to 97.4 lakh shares were withdrawn as of March 30, according to the data on the BSE. Overall subscription fell to 3.39 times compared with 3.6 times on March 28, when the issue closed.
What Lies Ahead?
There was a minor pullback from HNIs and retail investors. Meanwhile, no bids were withdrawn from mutual funds and domestic financial institutions. This shows that the street remained unmoved by the SEBI’s directive. That’s also one of the reasons behind the rise in the shares of Ruchi Soya despite SEBI’s order.