Piramal NCD Issue Brought JM Financial Under SEBI Scrutiny
Securities and Exchange Board of India investigated the NCD, which opened on Oct. 19, 2023, and closed on Oct. 30.
The October 2023 non-convertible debentures that have landed non-bank Blender JM Financial in trouble with the market regulator were issued by Piramal Enterprises Ltd.
The Securities and Exchange Board of India investigated the NCD, which opened on Oct. 19 and closed on Oct. 30. As per the regulator, the base issue size was Rs 200 crore and the greenshoe option was Rs 800 crore. SEBI did not name the issuer.
The only debt offer that matched the details given in the SEBI order was the NCD issued by Piramal Enterprises, as per the data available on the stock exchanges. The issue raised Rs 533 crore and was listed on Nov. 7. To be clear, SEBI did not name the issuer in its order.
A Piramal Enterprises official told NDTV Profit it does not want to comment since order is not related to the company.
SEBI has barred JM Financial from taking new mandates as a lead manager for public issues of debt securities in the second such instance of stern action by a financial sector regulator within a week.
For existing mandates, JM Financial is allowed to continue its role for 60 days from the date of the order, according to an interim order passed on Thursday.
"It was observed during the examination that in a particular issue, a significant number of individual investors sold the securities allotted to them on the day of listing itself," the regulator said in its ex-parte interim order.
SEBI's crackdown follows the Reserve Bank of India's order barring JM Financial Products Ltd. from offering finance against shares and debentures with immediate effect. The two regulators are taking coordinated action against the leveraged buying of shares in Indian markets.
In this case, SEBI's findings revealed a meticulously planned scheme aimed at manipulating the subscription and success of the public issue, according to the order.
JM Financial was crucial as the lead manager for the NCD public issue and JM Financial NBFC acted as an 'exit provider', according to SEBI. This means they gave funds to investors for buying NCDs during the public issue and later bought all the allotted NCDs from the investors they funded, it said.
What stands out in this investigation is the offloading of a significant portion of the acquired securities by JM Financial NBFC on the very same day, resulting in a financial loss.
SEBI expressed shock at the manner in which subscriptions were managed, revealing a scheme that seemed to encourage individual investors to make applications for NCDs.
Investors got money from JM Financial NBFC and were promised a profit when they sold their investments on the listing day, according to the order. The whole process, from providing funds to buying and selling securities, seemed planned in advance, it said.
On the listing day, a significant number of individual investors sold the allotted securities, leading to an unexpected change in the holding pattern and a sharp decline in retail ownership, SEBI said.
This abnormal behaviour on the listing day prompted SEBI to scrutinise the public issue as it appeared to deviate significantly from the usual market norms.
