look news india
New Delhi: After China recently jailed several bankers over the criminal role of investment bankers in its capital market, now the Indian government and the special capital market regulator Securities and Exchange Board of India (SEBI) have also woken up to the unscrupulous and innumerable SMEs in the primary market and have started taking punitive action against the practice of uncontrolled filling of IPOs and causing a surge in the stock with the listing.
Capital markets regulator Sebi has raised concerns over alleged malpractices by six domestic investment banks that brought IPOs to small businesses, sources said.
Sources, speaking on condition of anonymity, said SEBI had started investigating the matter earlier this year and focused on the fees charged by banks. According to information received in this case, investment banks are charging 15 percent of the funds raised by companies through IPO. Which is seen charging many times more than the standard range of 1 to 3 percent in India.
In India, companies with an annual turnover of Rs 5 crore to Rs 250 crore are listed on different platforms of BSE and NSE. Small to medium-sized SME IPOs that are listed on approved exchanges require less disclosures than larger-sized IPOs. While large-sized IPOs are permitted by SEBI.
Sources said SEBI's preliminary investigation suggests that high fees are paid to ensure oversubscription of IPOs. SEBI wants to curb collusive activities of banks and some investors who violate rules by placing large bids in large numbers and sizes from both high net worth investors and general retail investors. Sources say these bids are not genuine and are rejected at the time of allotment, but common investors are tempted to invest on seeing high bids.
More than 60 investment banks are active in the IPO of small businesses i.e. SME segment in India. In the last financial year March 2024, 205 small companies have raised capital of more than Rs 6000 crore, while last year 125 companies had raised Rs 2200 crore.
In the period from April to August of the current year, 105 companies have raised more than Rs 3500 crore through IPO. Senior SEBI official Ashwini Bhatia had earlier said that there is a lack of scrutiny in the IPOs of small and medium-sized companies. SEBI will soon propose to tighten the rules for this.