The proposed IPO by India Infoline Finance Limited (IIFL) has run in troubled waters. As per a report in Business Standard the Madras High Court has issued a notice to IIFL following a petition seeking stay on the IPO claiming that the public issue was in complete breach of the prosecution of sanction by the Serious Frauds Investigation Office (SFIO).
A Chennai-based, Rakesh Sheth, has filed the petition against India Infoline Finance Limited Holdings. Sheth has said that the Mumbai-based company should be restrained from going ahead with the public issue of secured and unsecured redeemable non-convertible debentures. IIFL is set to raise Rs. 2,000 crore via retail bonds and the subscription will open from January 22, 2019.
According to the petition, SFIO had recommended to the Ministry of Corporate Affairs (MCA) on September 4, 2018 for a permission to “refer to the SEBI for necessary stringent action, including preventing directors from accessing the money market and if required declaring them Not fit and proper.” Based on these recommendations, the MCA had directed SFIO on October 15, 2018 that “Matter may be referred to SEBI as proposed for taking appropriate action by it.”
Recently an article published in The Hindu Business Line said that the SFIO has sought cancellation of the banking licence of DCB Bank for allegedly entering into agreement to encourage the bank’s clients to enroll with India Infoline Commodities Limited for trading on National Spot Exchange Limited (NSEL).
IIFL, which is being probed for its alleged role in the NSEL scam by SEBI, should be restrained form proceeding with its public issue of secured redeemable non convertible debentures and unsecured redeemable non convertible debentures as mentioned in the shelf prospectus dated January 11, 2019, prays the petition.
Anand Rathi, another accused in the NSEL scam, withdrew their IPO in December, 2018. According to sources, the IPO was withdrawn as the Sebi refused to give green signal to raise monies from the market. Earlier, SEBI had put the much awaited NSE’s IPO on hold impending the closure of the co-location case.
The SEBI had issued a show cause notice to IIFL on April 24, 2017, declaring them not fit and proper to be part of the commodities. SEBI has alleged market manipulation, deviant broker behaviour, market abuse, mis-selling, cheating, market fraud etc and a hearing was scheduled on 29thJanuary 2019.
The Bombay high court had captured IIFL’s role in the NSEL scam in an order dated October 4, 2018. Justice BR Gavai and Justice MS Karnik of the Bombay HC had rejected IIFL’s petition to withdraw its application of registration for their registration as commodity brokers and stall SEBI’s investigations. Even the HC had stated that the market regulator had issued two show cause notices in the months of October 2016 and April 2017 where there were serious findings with regard to the activities of IIFL.
The Bombay HC order read: “After SEBI came to a prima-facie findings that there exists some adverse finding against the Petitioners (Including IIFL), they have moved for withdrawal of registration with an apprehension that some findings adverse to the interest would be arrived by the Whole Time Member of SEBI.” The court observed that “this was an attempt to leave the proceedings in the nip of the bud”.
“The SEBI inquiry would probe as to whether the applicant is a ‘fit and proper person’ the board is entitled conduct an inquiry not only about the Applicant intermediary, but also its principal officer, director, promoter and the key management persons, with regard to their integrity, character, absence of conviction and restraint orders, competence including financial solvency and net worth, absence of categorization as a wilful defaulter,” reads the detailed 30-page Bombay HC order.
IIFL however has commenced with the IPO since there is no stay from the high court. The issue opened on 22nd Jan 2019 and close on 21st February 2019. The Madras HC has kept the matter for hearing on 6th March 2019.