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Standing Committee on Finance quizzes SEBI Chief on Co-location scam, IPO controversies

Our Bureau | | Updated on: Apr 05, 2022
Chairperson of the Securities and Exchange Board of India Madhabi Puri Buch

Chairperson of the Securities and Exchange Board of India Madhabi Puri Buch | Photo Credit: KUNAL PATIL

SEBI Chief asked to give replies in writing by this month end

Valuation of new age tech companies (NATCs), the much talked about Co-location scam of NSE , recent controversy in Ruchi Soya’s FPO and Sahara Deposits matter were among the barrage of questions that new SEBI Chief Madhabi Puri Buch had to field when she deposed before the Standing Committee on Finance here on Tuesday.

The Standing Committee on Finance headed by BJP MP Jayant Sinha had “grilled” Buch for about two and half hours on these variety of topics concerning capital market. She has been asked to submit written replies to the queries of the Panel members within this month, sources said. In May, the Panel members propose to visit Mumbai for assessing the functioning of the regulator and various market infrastructure institutions including the bourses.,

“We want to assess the regulatory capacity of the institutions including SEBI”, a member told BusinessLine.

On NSE governance failure related to former CEO Chitra Ramkrishna, one of the Panel members sought entire internal documents of the regulator’s internal probe on NSE , while trying to ascertain why there was a delay in handing over the case to CBI or any other federal investigation agency. “SEBI could have handed it over much earlier to CBI”, the member said.

The hot topic of crypto regulation was also discussed at today’s meeting, sources added.

On NATCs, the Standing Committee members are understood to have quizzed SEBI Chief on the mega ₹ 18,300 crore Paytm IPO, where retail investors had faced substantial value erosion ( basically lost their shirts) post listing. 

Not only did the new age tech company’s stock list below its issue price, the stock got heavily pummelled in the recent months as part of the huge tech sell off that markets around the world witnessed post the US Fed’s hawkish statements on unwinding of monetary stimulus and heavy hint of raising interest rates to tackle the rising inflationary pressures in the US economy. The global equities especially tech companies also faced selling pressure in the wake of geo political tensions arising from the ongoing Russia-Ukraine conflict that began from February last week. 

Members of Standing Committee are understood to have sought SEBI Chief’s explanation on what the market regulator was doing about NATCs and their valuation and future course of action on allowing such companies to tap public markets, sources said.

Paytm Promoter Vijay Shekhar Sharma had sought to downplay the poor performance of Paytm stock by reportedly stating that investors did not really understand the business model of Paytm.

Interestingly, most of the NATCs that tapped IPO market last year—which saw historic and highest ever IPO mop up in last two decades of about $ 16 billion —are quoting well below (average 40 per cent down)  their listing price.

Fake promises on SMS

Standing Committee on Finance Members had also raised the recent controversy over Ruchi Sonya’s ₹ 4000 crore Follow on Public Offering (FPO), after Sebi pulled up the company for the circulation of unsolicited SMSes promising mega returns. SEBI had directed the company to open a three day window for withdrawal of investors participation to the FPO in the wake of fake SMSs

Members of Parliamentary Panel were anguished  about the growing trend of misinformation on social media and stock manipulation by unscrupulous operators, sources said. 

Published on April 05, 2022
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