Sebi mocks fund-raising claim

Sebi said that a large company collected $4-5 billion from more than 30 million investors and claimed it was a 'private placement'

Taking a veiled jibe at Sahara Group, market regulator Securities and Exchange Board of India (Sebi)’s Chairman U K Sinha on Tuesday said a large company collected $4-5 billion from 30-million investors and claimed it was a private placement.

Under the Sebi rules and Companies Act, a private placement is defined as issuance of shares or other securities to a maximum of 49 persons and anything involving 50 or more investors is considered a public offer.      

Sinha also said the first regulatory agency that comes to people’s mind is Sebi, when the issue of investor protection in cases of deposit-taking by unathourised schemes comes to fore.    

“The company claims it was a private placement. How a private placement can reach to 30 million is another question?"

Sebi has been engaged in a long-running case with Sahara Group over refund of more than Rs 24,000 crore (about $5 billion) collected by two Sahara companies from more than thirty million investors through issue of certain bonds.

The companies were asked by the Supreme Court last year to deposit the money to Sebi for further refund to investors after verifying their genuineness and the market regulator recently initiated a process for the refund.     

However, the companies have deposited Rs 5,120 crore and have claimed that more than Rs 20,000 crore they have refunded directly to the bondholders. The case is set for hearing by the court on Wednesday.

Speaking at a venture capital conference here, Sinha said the aim was to protect the interests of investors and focus on corporate governance.      "When some company, not even registered with Sebi, raised money from ordinary investors, for example in West Bengal, people started blaming Sebi.”      

"There are multiple companies that raised money from large number of investors. The perception was that money is lost," Sinha said.

 

"So, we are accountable, as the first agency which comes to anybody's mind is, if there is any issue about investor protection, that's Sebi. We have to be careful about that," he said.