SEBI Orders Ruchi Soya To Allow Withdrawal of Bids in View of Misleading SMS Messages about FPO
Moneylife Digital Team 29 March 2022
The Securities and Exchange Board of India (SEBI) has taken cognisance of the misleading promotion of Ruchi Soya’s follow-on public offer (FPO) by asking lead managers to initiate corrective action and give investors an opportunity to withdraw.
Essentially, Ruchi Soya, after its acquisition by yoga guru Baba Ramdev had almost no floating stock (about 1%), which has led to its shares trading at a high of over Rs1,500 right amidst the pandemic in June 2020, a rise from Rs17 in January that year. Investors are being misled into believing that at a price band of Rs615-Rs650 the shares are available at a 30% discount when, in fact, the high increase in floating stock is likely to lead to a significant correction in the stock price.
On 28th March, the day issue was supposed to close, SEBI had a meeting with book running lead managers of the FPO of Ruchi Soya–SBI Capital Markets, Axis Capital Ltd and ICICI Securities Ltd—regarding the circulation of unsolicited messages advertising the issue. An order issued by assistant general manager Abhishek Ranjan says the content of these messages were, prima facie, misleading/fraudulent and not in consonance with SEBI (ICDR) regulations, but does not mention any specific messages.
SEBI has ordered corrective action in the form of an advertisement in the newspapers cautioning investors on the circulation of unsolicited SMS messages. All investors/bidders (except anchor investors) shall be given the option to withdraw their bids. The withdrawal window is for three days starting today, 28th March to 30th March (both days inclusive). The procedure for withdrawal will be part of the advertisement, it says.
SEBI has also asked the lead managers to inform stock exchanges immediately and also send an SMS to all applicants who have submitted bids informing them about the option to withdraw. Stock exchanges and depositors have been asked to make arrangements for the withdrawal.
Here is an example of the kind of messages that have been going around.
Interestingly, the Congress party in a press conference held on 27th March had mentioned the controversial process in which Ruchi Soya’s acquisition has happened under the bankruptcy law, allowing the yoga guru to acquire the company virtually free.
Baba Ramdev’s firm Patanjali Ayurved was funded to the tune of Rs3,250 crore by banks in his bid to acquire Ruchi Soya at Rs4,350 crore. The market-capitalisation of the company is over Rs24,000 crore now. The FPO is being made at a discount to the current price of around Rs800 when the floating stock is virtually non-existent to allow the company to raise Rs4,300 crore which is the exact amount paid for its acquisition. This will be used to repay the bank loans, virtually giving the company free to Patanjali Ayurved.
1 year ago
Show bating by SEBI
1 year ago
Please clarify my doubt:
Patanjali Ayurved would have raised bank borrowings to fund Ruchi Soya bailout/ buyout. In that case how Ruchi Soya's FPO would be beneficial to promoter Patanjali Ayurved to repay its loan
1 year ago
Patanjali acquired a worthless company, debt ridden and cash strapped with only one product. In the process saved the entire social value (jobs) as well as the brand. They transferred all their products like biscuit to ruchi soya and added new products like honey. The value sought in FPO is very reasonable. Also their is nothing wrong in the sms. So what is the fuss about. All knowledgeable institutions have subscribed to the issue.
Replied to Gaurav.stena comment 1 year ago
Only a worthless company will acquire a worthless company. So you mean Patanjali is itself worthless. However, Patanjali has not paid anything from its pocket; raised debt and now is asking those who want shares of Ruchi to pay the amount equal to the debt raised. Patanjali is fully insulated from any liability for Ruchi and holding 80% of equity, free. If there was no diversified machinery/ equipment with Ruchi, why were some businesses transferred to Ruchi. What is right in the SMS and why it is being sent to those who did not solicit it. All knowledgeable institutions subscribed to PayTM and retail investors followed and drowned. You want an encore.
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