Sebi warns Baba Ramdev for making dubious claims ahead of Ruchi Soya FPO

Yoga guru Baba Ramdev has got away with a mere rap from market regulator Securities and Exchange Board of India (Sebi) for making dubious investment promises.

In a viral video, Ramdev is seen asking his followers to buy shares of Ruchi Soya Industries if they want to become crorepatis. The comments came ahead of the company’s Rs 4,500-crore fundraise by way of a follow-on offering (FPO).

“Ruchi Soya’s FPO is being talked about. I give you the mantra to become a crorepati. Open a demat account today itself. Buy shares of Ruchi Soya when I tell you. After that shares of Patanjali, whose market cap is lakhs of crores any global agency will tell you,” he is seen saying in Hindi.

Patanjali Ayurved group, which is currently unlisted, is the promoter of Ruchi Soya.

Sebi has shot a letter to Ruchi Soya’s Board censoring them over the comments.

“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 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.”

“Once a company starts the IPO/FPO process, it needs to follow very strict public communication guidelines so as to maintain the sanctity of dissemination of marketing information to the public. Pursuant to the ICDR regulations, Sebi has issued warning to Ruchi Soya so that the company officials do not make improper communication to the markets like “ Mantra for becoming a crorepati”. etc. This is particularly important as there is lots of frenzy in the market particularly relating to new issuance of equity,” said Mohit Saraf, founder & managing partner, Saraf & Partners.

Ramdev, however, has just got away with a warning this time.

“In view of the above, you are hereby warned to ensure compliance with SEBI (ICDR) Regulations, 2018. The warning is being issued without prejudice to any future action,” the Sebi letter states.

In August, Ruchi Soya got a Sebi nod to launch its Rs 4,300-crore FPO. The fresh fundraise will help the company pare its debt and reduce the promoter shareholding. The promoter holding in the company is currently at 98.9 per cent.

Shares of Ruchi Soya had jumped over 200 times in 2020. This year, the stock has gained another 56 per cent.

The gains come following Ruchi Soya’s acquisition by Pantanjali Ayurved under the Insolvency and Bankruptcy Code (IBC). The trading in the stock was suspended between November 2019 and January 2020 amid the IBC proceedings

Market experts caution that Ruchi Soya’s the free-float - shares available for trading - is just 1.1 per cent, which prevents fair price discovery. As a result, investors should be careful while dealing in the stock. “Once the FPO goes through, one can expect better price discovery, as more shares will be available for trading,” said a broker.