The present matter emanates from an investigation carried out by Sebi into the IPO of Sudar Industries Ltd (SIL) for which Ashika Capital Limited was the Book Running Lead Manager (BRLM).
Consequent to such investigation, lapses in Ashika Capital’s role as the BRLM were found.
In its order, Sebi said that the issuer company did not disclose the transactions of Addon Exports, A R Fabrics, ElimTraders, R J Traders and Shalom Fashion, which were proprietorship firms of employees of SIL and persons connected or related to key management personnel of SIL, in the Related Party Transactions.
Moreover, Sebi noted that Ashika Capital did not take any step to seek clarification from the company towards verification of the genuineness of the information before disclosure in the prospectus.
The merchant banker has merely relied on an undertaking and information given by the issuer company instead of independently verifying the facts by examination of the document, it added.
“The noticee (Ashika Capital) has failed to conduct even an elementary level verification of the persons associated with the company’s board and the whereabouts of the major clients or customers of the company before coming forth with the disclosures in the prospectus/offer document. This has led to wrong and misleading disclosures by the noticee,” Sebi said.
“There is a serious lapse in the exercise of due diligence from the side of the notice as a merchant banker,” it added.
It, further, said Ashika Capital by not independently exercising adequate diligence while acting as the BRLM in the IPO of SIL has deprived the investors of material information to enable them to make a balanced and well-informed decision.
Through such acts,Ashika Capital has violated the code of conduct mentioned in merchant bankers norms.
Accordingly, Sebi has directed “thenoticee i.e. Ashika Capital Ltd …shall be prohibited from accepting any new clients for a period of three months”.
This order would come into force with immediate effect, the regulator said.
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