Mumbai: One of the most oversubscribed public issues since the turn of the millennium, the Advanced Enzyme Technologies Ltd initial public offer (IPO), saw at least some investors think twice before bidding. And the reason they thought about skipping it is slightly unusual.

Advanced Enzyme is involved in the manufacture of enzymes. These are used as ingredients in medicines and nutrition-related products. While the IPO was in progress, a rumour began making rounds that the enzymes were produced from animal sources, making the business a “non-vegetarian" one.

Shweta Jain, 33, from Andheri was advised against investing in the company by her cousin, though she was bullish on the healthcare segment. Chetan Shah, a 50-year-old businessman involved in diamond trade, and who generally invests in IPOs, got a similar message on his phone. Both decided against investing in the company.

“Those who believe in non-violence should not subscribe to the issue," said one such WhatsApp message seen by Mint. Similar messages were seen in Hindi and Gujarati. Another such message cited Mahatma Gandhi and Lord Mahavir, the founder of Jainism.

The company came out with a statement that the rumours were untrue. A spokesperson clarified that the company produces enzymes only through microbial fermentation.

“This modern biotechnological route harnesses the power of microbes for producing enzymes and doesn’t involve any extraction from or using animals," said an emailed statement from the company, which had been earlier shared with investors.

Officials declined to answer further questions, saying that the company does not comment on market speculation or rumours.

But the fact that the company decided to come out with a clarification at all suggests the rumour was seen to have the potential to affect the issue.

Two brokers whom Mint spoke with explained that Gujarati Jains form a significant chunk of the investing community. Its members do not believe in consuming non-vegetarian food since they practise non-violence towards animals and, therefore, avoid businesses seen to be making money from such acts.

The company’s statement was required to tell the community that it is not involved in such a business despite getting a thumbs-up from most investment advisors.

Such scruples in investing are not entirely unheard of. Shariah funds invest in companies that run their businesses in accordance with Islamic Shariah principles. For example, they avoid businesses involved in making alcohol. Even overly indebted ones are a no-go.

Other “ethical" funds avoid companies known for acting in an unscrupulous manner. For example, they may avoid a company which has a poor environmental track record. Similarly, many investors look at ESG (Environmental Social and Governance) factors while investing. There are also indices which track such companies and against which funds can benchmark themselves. Sometimes, companies which fail such standards are avoided even if they are good businesses.

An IIFL Private Wealth Management IPO note talked about the opportunity size and growth visibility for Advanced Enzyme, which has sales of $45 million and an addressable market of $2 billion. The 15 July report, authored by analyst Bhavesh Gandhi, recommended that investors subscribe to the issue.

However, rumours were not enough to check investor enthusiasm for Advanced Enzyme. When its offer closed on 22 July, the company received an overwhelming response to its 412 crore issue, getting a demand for 115.89 times the shares on offer. This makes it one of the top 10 issues in terms of over-subscription of shares on offer since 2000. It is ninth on the list, just ahead of Steadfast Corp., whose March 2000 IPO was oversubscribed 115.92 times.

The opening is likely to be closely watched. Maybe more so by vegetarians who skipped the issue, whose shares were at quoting at a 40-45% premium to the issue price of 880-896 per share in the grey market.

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