Sebi hits pause on HDFC AMC’s IPO while it probes past violations
New Delhi: The Securities and Exchange Board of India (Sebi) has put on hold the initial public offering of HDFC’s mutual fund arm HDFC Asset Management Co. Ltd, due to past violations, according to a filing on the markets regulator’s website.
“Sebi has sent a letter to lead manager Kotak Mahindra Bank that proceedings have been kept in abeyance for examination of past violations,” the regulator said on its website.
The regulator did not disclose the nature of these violations but its move could be due to a past front running case. Front running is the practice of a broker or trader stepping in front of large orders to gain economic advantage.
In the Draft Red Herring Prospectus (DRHP) present on the regulator’s website HDFC AMC said, “we are involved in an investigation initiated by Sebi with regard to alleged front-running and violation of securities laws”.
Calls and text messages sent to Millind Barve, managing director of HDFC AMC, did not result in a response until press time.
This will likely push HDFC’s Rs3500 crore public offering to at least the third quarter of the financial year when the fund house was earlier looking at June for the IPO.
The fund house is offering 8,592,970 equity shares of HDFC AMC at Rs5 each.
“The investigation is still on-going and may take sometime to finish. Sebi’s investigation in the front running case case was three levels - one involved key officials of fund house, the second involved equities dealers who received privileged information, and the third involved intermediaries who made gains for themselves and in their client accounts,” said a person familiar with the developments declining to be named.
Once the investigation is complete, the regulator will pass final orders. Only after that the company will get a green light for its IPO, he added.
On 24 July 2014, Sebi had barred Nilesh Kapadia, former dealer of equities at HDFC AMC, for 10 years for providing privileged information to three traders.
Subsequently, Sebi on 18 January 2016 had asked Kapadia, his wife and five others to disgorge “ill-gotten” gains to the tune of Rs3.35 crore.
Another big public offer being kept in abeyance is that of National Stock Exchange of India Ltd (NSE), due to pending investigation in a matter of alleged unfair access to few brokers who traded on NSE’s algorithmic trading platform. According to a Mint report on 9 March the IPO is likely to happen only in 2019.