Pal-Peugeot Seeks Money From Issue Underwriters

The Securities and Exchange Board of India has initiated moves to ensure that all issue underwriters fulfill their commitments.

In a notice to stock exchanges, Sebi has directed the governing bodies to take strong action against member-brokers who have underwritten issues and defaulted on underwriting commitments. The regulator has also informed the concerned companies regarding this directive.

In response to the circular from Sebi, PAL-Peugeot has sent a list of individual broker-underwriters to the respective stock exchanges who have failed to pay up after they took on underwriting commitments when Pal-Peugeot went public in December 1995.

PAL-Peugeot made a net offer of 5,71,84,000 of equity shares of Rs 10 each for cash at par aggregating Rs 57.19 crore and 33,602,000 secured redeemable partly convertible debentures of Rs 50 each aggregating Rs 168.01 crore at the rate of 15 per cent.

According to the letter sent by PAL-Peugeot to the stock exchanges, 31 individual broker underwriters to the issue that hit the market on December 18, 1995, have not fulfilled their underwriting commitments.

Sources said that there were 48 individual broker underwriters in all who took up underwriting commitments in the issue. So a remarkable 65 per cent of the individual broker underwriters have defaulted.

In the note to the Calcutta Stock Exchange, PAL-Peugeot has named three Calcutta based underwriters: Keshav Kumar Saraf, Tarun Sethia and Global Capital Markets, who are yet to pay up.

According to the Sebi directive, the CSE board will now have to take action against these brokers.

According to the letter sent by the company, the underwriters were committed to pay up that portion that of the partly convertible debentures (PCDs) that was under-subscribed.

Angry city brokers however said that they have already paid up their commitments in the issue by way of 'khoka' buyback scheme. This means that they have paid up the difference between the issue price of the non-convertible portion of the PCDs and the discount price at which these were placed in institutions.

Sources said however, that the company had declared that the 'khoka' buyback scheme was not available for underwriters.

But the Calcutta based broker-underwriters claim to have already received the underwriter's commission and the brokerage from the company.

An underwriter said: "If PAL-Peugeot had any outstanding claims from us, then why have they paid up our dues by way of brokerage and commission ? We naturally assumed that all our commitments have been cleared after getting our dues from the company."

"In fact, if Sebi is so keen to haul up errant underwriters, then the question arises that why has Sebi not taken direct action against the merchant bankers registered with them before expecting the stock exchanges to mete out penal action against member brokers?" said one underwriter who has been named in the PAL-Peugeot's letter to the CSE.

The lead managers to the PAL-Peugeot issue were IL&FS, Hong Kong Bank (Mumbai), I-Sec (Mumbai) and SCICI (Mumbai).

The co-managers to the issue were Bank of Baroda (Mumbai) and Canara Bank (Mumbai) while Karvy Consultants (Hyderabad) were registrars to the issue.