Sebi directs Ruchi Soya to allow FPO investors to withdraw bids

Circulation of unsolicited SMSes advertising the issue violates regulations, says the market regulator; Sebi orders a 3-day window for all investors (ex-anchor Investors) to withdraw applications

The Securities and Exchange Board of India (Sebi) has directed Ruchi Soya Industries to give the investors who participated in its Rs 4,300-crore follow-on public offering (FPO) the option to withdraw their bids due to “circulation of unsolicited SMSes advertising the issue”.

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

According to sources, the SMSes pitched the FPO as a good investment opportunity in Patanjali Group. Business Standard couldn't verify the contents of the SMSes allegedly circulated during the FPO, which closed on Monday, garnering 3.6 times subscription. 

Industry experts said Sebi’s diktat could delay the listing process and 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 has said.

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

Market observers said the unprecedented action taken by the regulator had cast doubts on 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 priced its FPO in the range of Rs 615 and Rs 650 per share – 20 to 25 per cent lower than the last close.

The Baba Ramdev-led Patanjali Ayurved owns 98.9 per cent 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 wanted to become crorepatis. “In the video, Shri Ramdev, 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 had said in a letter to Ruchi Soya’s board, on which Ramdev is a non-executive director.

The said clause says 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 says, “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.