The Securities and Exchange Board of India (SEBI) has directed Vaswani Industries to give a withdrawal option to investors in the non institutional investors (NII) and retail individual investor (RII) categories.

SEBI also prohibited Rikhav Securities to act as a syndicate/sub syndicate member for all forthcoming IPOs while Bajaj Consultants and nine of its group companies have been directed to stop bidding in an objectionable manner till further directions.

SEBI had directed stock exchanges on May 19 to withhold the listing of Vaswani Industries following complaints of irregularities in subscription especially huge withdrawals and rejections after IPO closure.

The company had offered one crore shares in the price band of Rs 45-49 a share for subscription and the issue was subscribed 4.16 times. Qualified Institutional Buyers (QIBs) subscribed to just 0.16% of their allotted 50% portion whereas non institutional investors (NIIs) oversubscribed 11.29 times and retail investors oversubscribed 6.83 times. The under subscription in the QIB portion devolved on to the NII and retail investors and they received a higher allotment of shares.

Lower QIB subscription

SEBI has asked Vaswani Industries to give NIIs and RIIs an option to withdraw to the extent by which the allotment ratio was impacted due to lower subscription of QIB portion.

The book running lead manager (BRLM), Ashika Capital has been directed to compute the allotment ratio again in consultation with the BSE and publish the revised share allocation in all newspapers (where the issue advertisements were made earlier) along with the withdrawal option. This option should be kept open to NIIs and RIIs for a 10-day period from the date of the advertisement.

For investors opting to withdraw, refund would be less due to IPO expenses by a maximum of one per cent from the subscription amount.

The BRLM has been asked to open a separate escrow to credit shares being offered for withdrawal; investors opting to withdraw shall enclose a separate delivery instruction slip for transferring the said number of shares into the escrow account.

Depositories have been asked to permit to and fro transfer of these shares from the escrow account and the company and BRLM have been asked to cancel shares not underwritten or taken by other investors identified by the BRLM.

If the subscription level falls below the minimum level required by law, the BRLM has been asked to either buy or arrange for a buyer to maintain the minimum subscription level. Non compliance would result in refund of entire subscription to investors and cancelation of all shares allotted by the company.

Exchanges have been advised to ensure compliance of SEBI directions by the company and the BRLM before granting listing and trading permission.

SEBI has directed the BRLM to refund the money within seven days to investors and cancel allotment of shares if the company fails to provide the withdrawal option within the given time frame.

SEBI said that the investigation under way shall examine role of intermediaries in this IPO and these directions shall not be construed as adverse to Vaswani Industries pending investigation.