Sebi bars Gretex from merchant banking for 21 days over IPO lapse

India's markets regulator on Thursday barred Gretex Corporate Services Ltd from taking on new merchant banking assignments for 21 days with immediate effect, citing lapses in due diligence during the public listing of small firm Jayant Infratech Ltd.

The Securities and Exchange Board of India (Sebi) said Gretex failed to verify and disclose that nearly 40 per cent of the IPO proceeds were proposed to be used as a deposit for renting an office premises that was still under construction.

The firm relied solely on a site visit and did not obtain supporting documents such as a completion or occupancy certificate, Sebi added.

 

Gretex did not immediately respond to a request for comment outside office hours.

India has seen a surge in IPOs from small and medium-sized enterprises (SMEs) with annual turnover between 50 million and 2.5 billion rupees, prompting tighter regulatory scrutiny to protect investors.

Sebi said Gretex's "perfunctory" due diligence misled investors about the use of IPO proceeds and breached disclosure norms. It also noted that the firm failed to maintain the required minimum net worth of 50 million rupees in 2019-20, violating merchant banking regulations.

While Gretex later took corrective action to restore its net worth, Sebi said the failure to disclose was a "substantive lapse" warranting regulatory action.