Financial Daily from THE HINDU group of publications
Thursday, May 23, 2002
Regulatory Bodies & Rulings
Markets - Regulatory Bodies & Rulings
SEBI warns Balaji Tele lead managers
MUMBAI, May 22
THE Securities and Exchange Board of India (SEBI) has issued warning against three merchant bankers for violation of due diligence obligation in the case of Balaji Telefilms Ltd's (BTL) initial public offer (IPO).
The three lead mangers are JM Morgan Stanley Pvt Ltd, IL&FS Merchant Banking Services Ltd and Triumph International Finance Ltd.
According to SEBI, the lead managers to BTL's IPO in October 2000 had violated clause 2 of the Code of Conduct laid down in Schedule III of the SEBI (Merchant Bankers) Regulations, 1992.
The case pertained to altering the capital structure of BTL within six months of its initial public offer.
Although BTL had stated in the offer document that it did not have any intention to alter its capital structure within six months of the IPO, in November 2000, the company's board approved a proposal to merge BTL with Nine Network Entertainment India Pvt Ltd.
The merger entailed a transaction of shares on a swap ratio of 65 shares of BTL for every 200 shares of Nine Network Entertainment India. However, the proposed merger with Nine Network was called off later.
Subsequently, SEBI had initiated an inquiry against the three lead managers and found them guilty. "It was found that none of the lead managers had actually raised the issue of the implications of the merger proposal on the disclosure made in the prospectus with BTL or questioned them on this when they first came to know of it," SEBI said.
However, action against them was lowered to a warning as all of them had "good previous record and it was the first case of initiation of action against them." Incidentally, Triumph International Finance Ltd is an associate of Ketan Parekh who has been accused in the pay-order scam.
They had also not alerted the regulatory authorities of the merger, SEBI said.
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