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Sebi directs Ruchi Soya to allow FPO investors to withdraw bids

According to the market regulator, sending unsolicited SMSs promoting the issue is against the law. All investors (ex-anchor investors) have a three-day window to withdraw their applications, according to the Sebi.

Due to the “distribution of unsolicited SMSes advertising the issue,” the Securities and Exchange Board of India (Sebi) has advised Ruchi Soya Industries to provide investors who participated in its Rs 4,300-crore follow-on public offering (FPO) the option to withdraw their bids.

The market regulator stated in a letter to the three investment bankers overseeing the share sale that the contents of these SMSes appear to be “misleading/fraudulent” and in violation of the ICDR (Issue of Capital and Disclosure Requirements) Regulations.

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According to insiders, the SMSes promoted the FPO as a solid Patanjali Group investment opportunity. The contents of the SMSes purportedly disseminated during the FPO, which closed on Monday with 3.6 times subscription, could not be verified by Business Standard. According to industry analysts, Sebi’s directive might slow down the listing process and increase the danger of an unsubscribed share sale if a large number of investors withdraw their bids.

“With the exception of anchor book participants, all investors/bidders will be offered the option to withdraw their bids.” The withdrawal window will be open on March 28, March 29, and March 30, 2022. The method for withdrawal will be communicated to investors and will be included in the advertisement,” Sebi stated.

The FPO was subscribed 2.2 times by qualified institutional buyers (QIBs), 11.75 times by high-net-worth individuals (HNIs), and 7.8 times by employees. Only 90% of the retail section of the issue was subscribed.

According to market analysts, the regulator’s extraordinary action has placed question on the fate of the FPO, which was created to meet the minimum free-float requirement.

Sebi directs Ruchi Soya
Sebi directs Ruchi Soya

Ruchi Soya’s stock slid 6% on Monday, closing at Rs 815. The company priced its FPO between Rs 615 and Rs 650 per share, which is 20 to 25% lower than the previous close.

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Baba Ramdev’s Patanjali Ayurved owns 98.9% of Ruchi Soya, with the public owning only 1.1 percent. Patanjali’s stake is projected to drop to 81 percent following the FPO, while public shareholding would climb to 19 percent. Better price discovery would have benefited from the move.

This isn’t the first time the corporation has had a run-in with the authorities. Sebi issued a warning to the yoga guru and the company in October 2021 for making questionable investment promises.

Ramdev was shown in a viral video encouraging his followers to invest in Ruchi Soya Industries if they wanted to become crorepatis. “ Shri Ramdev, one of the issuer’s directors, is seen addressing a crowd at one of his yoga shivirs, or yoga meets, in the video. In his talk, he is shown promoting Ruchi Soya Industries’ FPO, referring to the investment as a “mantra for becoming a crorepati” in his own words. The specified address, as explained in Schedule IX of the Sebi (ICDR) Regulations, 2018, falls under the category of “public communication.” “Primarily, the accompanying address by one of the issuer company’s directors appears to be non-compliant with the following clauses of Schedule IX,” Sebi wrote to Ruchi Soya’s board, on which Ramdev serves as a non-executive director.

According to the rule, a corporation aiming to reach public markets should only communicate information contained in the draught offer document. “No public material relating to the issuance shall contain any offer of incentives, whether direct or indirect, to the investors in any fashion, whether in cash, kind, services, or otherwise,” it adds.

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