ICICI Prudential Asset Management Company (IPRU) has just been rapped on its knuckles by the markets watchdog. According to The Economic Times, the fund house had ploughed in Rs 640 crore in the initial public offering (IPO) of ICICI Securities (ISEC) under five of its schemes. Of this amount, Rs 400 crore was applied on the first day and Rs 240 crore was applied on the last day.
A source told the daily that Sebi recently penned a directive to IPRU alleging that "The decision to revise bids and make additional bids amounting to Rs 240 crore on the last day is a clear indication of facilitating subscription in the QIB portion so that the issue does not fail". In other words, according to Sebi, IPRU's second investment saved the IPO.
To remind you, ISEC had launched its IPO in March for 7.72 crore equity shares with a price band of Rs 519 to Rs 520. The issue was filed under regulation 26 (2) of the SEBI (Issue of Capital and Disclosure Requirements) Regulations 2009, wherein at least 75 per cent of the net offer to public has to be allotted to Qualified Institutional Buyers (QIB). Failing that, the full subscription money has to be refunded. IPRU had applied for and was allotted a total of around 123.08 lakh shares at the upper end of the price band, i.e. Rs 520, in the QIB category.
However, the regulator claims that the move was neither in the best interests of investors nor in conformation with mutual fund norms. "IPRU has been investing in multiple tranches in various IPOs. The practice of revision of bids during the 3-5 day bidding period appears contrary to the stated 'long-term investment' and investment based on fundamentals philosophy of IPRU," said Sebi's letter, adding, "Further, it is difficult to comprehend what changes in fundamentals of ISEC during the bidding period could have caused IPRU to make additional bids of Rs 240 crore on day 3 of the public offer, once a fairly large bid of Rs 400 crore was already made on day 1".
So the market regulator has reportedly directed IPRU to refund Rs 240 crore to all the five schemes that subscribed to it, namely ICICI Prudential Balanced Advantage Fund, ICICI Prudential Balanced Fund, ICICI Prudential Banking and Financial Services Fund, ICICI Prudential Focused Bluechip Equity Fund and ICICI Prudential Value Fund Series 19.
Sebi's directive also asked the fund house to pay investors who have redeemed their units since the date of allotment in the IPO. "For this, the AMC shall determine the loss incurred by respective schemes due to fall in the price of ISEC scrip and investors should be paid to the extent of units redeemed by them during the aforementioned period [from the date of allotment till the date when the AMC refunds the amount to the schemes]. The payments by AMC to the investors shall be with an interest of 15 per cent per annum starting from the date of redemption till the date when the said payment is made by the AMC," the directive added.
The ISEC scrip had made a lacklustre debut on the exchanges as it got listed at Rs 431.10 on the BSE, down 17.10 per cent from the price shelled out by IPRU. On the NSE, the stock listed at Rs 435. It is currently trading at Rs 320 apiece, down over 38 per cent from the IPO price.
The daily added that the loss of Rs 89 crore, courtesy the fall in stock price, will have to be borne by the fund house.