Sebi directs Ruchi Soya to allow FPO investors to withdraw bids

The Securities and Exchange Board of India (Sebi) has directed Ruchi Soya Industries to give the option to investors, who participated in their follow-on public offering (FPO), to withdraw their bids due to “circulation of unsolicited SMSs advertising the issue”.

In a letter to the three investment bankers handling the share sale, Sebi has said prima-facie the contents of the SMSs appear to be “misleading/fraudulent” and not in consonance with the ICDR (Issue of Capital and Disclosure Requirements) Regulations.

Sources said the SMS contained forward looking statements with regards to Ruchi Soya’s share price performance to attract investors towards the issue. Business Standard couldn’t verify the contents of the SMSs allegedly circulated during the FPO.

Ruchi Soya’s FPO, which closed on Monday, has garnered 3.6 times subscription. Industry experts said Sebi’s diktat to the company could delay the listing process and also increase the risk of share sale getting unsubscribed if a large number of investors withdraw their bids.

“All investors/bidders (except anchor book participants) shall be given an option to withdraw their bids. The window for withdrawal shall be available on March 28, March 29 and March 30, 2022. The procedure for withdrawal shall be informed to investors and shall form part of the advertisement being issued,” Sebi directed.

The qualified institutional buyer (QIB) portion of the FPO was subscribed 2.2 times, high-networth individual (HNI) portion 11.75 times and employee portion about 7.8 times. The retail portion of the issue was subscribed only 90 per cent.

Market observers say the unprecedented action taken by the regulator has cast doubts over the fate of the FPO, which was done to meet the minimum free-float obligation.

Shares of Ruchi Soya dropped 6 per cent on Monday to close at Rs 815. The company has priced its FPO in the range between Rs 615-Rs 650 per share – 20 per cent-25 per cent lower than the last close.

The Baba Ramdev-led Patanjali Ayurved owns 98.9 per cent stake in Ruchi Soya, while only 1.1 per cent is with the public. Following the FPO, Patanjali’s shareholding is expected to reduce to 81 per cent, while public shareholding will rise to 19 per cent. The move would have helped with better price discovery.

This is not the first time the company has run into trouble with the regulator.

In October 2021, the yoga guru and the company were warned by Sebi for making dubious investment promises.

In a viral video, Ramdev was seen asking his followers to buy shares of Ruchi Soya Industries if they want to become crorepatis.

“In the video, Shri Ramdey, one of the directors of the issuer is observed to be addressing a gathering at one of his Yoga Shivirs or Yoga Meets. In his address, he is observed to be marketing the FPO of Ruchi Soya Industries and in his own words terming the investment as ‘Mantra for becoming a Crorepati’. It is noted that the referred address falls under ‘Public Communication’ as explained under Schedule IX of SEBI (ICDR) Regulations, 2018. Prima-Facie, the attached address by one of the directors of the issuer company appears to be non-compliant with the following clauses of Schedule IX,” Sebi said in the letter to Ruchi Soya’s Board, where Ramdev is a non-executive director.

The said clause stated that a communication by a company planning to tap public markets should contain only such information as contained in the draft offer document. It also said, “No public information with respect to the issue shall contain any offer of incentives, to the investors whether direct or indirect, in any manner, whether in cash or kind or services or otherwise.”

Back then, Ramdev and the company had just got away with a warning.

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