Sebi raises concern over $1.5 bn HDB Financial Services IPO
Subscribe to enjoy similar stories. Mumbai: The stock market regulator is examining a potential violation of the Companies Act by HDB Financial Services 17 years ago as the non-bank lender prepares for a $1.5 billion initial public offering (IPO), three people aware of the matter said. The Securities and Exchange Board of India (Sebi) found that the lender in 2008 issued shares to more than 50 employees of its parent HDFC Bank through a private placement, one of the three people said.
The regulator now plans to refer the matter to the Union ministry of corporate affairs (MCA), since this may constitute a violation of the Companies Act, the person said on the condition of anonymity. Under the Companies Act, issuing shares to more than 50 people is considered a public issue, requiring compulsory Sebi clearance. A preferential issue such as the one made by HDB is a private placement, and such an issue cannot be made to more than 50 investors without Sebi approval.
The threshold of 50 was added to the Companies Act in 2000. Also read | HDB IPO: Two concerns that could hurt the HDFC Bank subsidiary’s valuation “If Sebi discovers a breach in the extant laws any time after Sebi’s inception, the issuer company may either be asked to pay a penalty or be debarred altogether from the market for a certain period. In this case, the company may have to pay a penalty to get its IPO application cleared," the person added.
Queries emailed to HDB, HDFC Bank, MCA and Sebi remained unanswered. HDB filed its draft IPO papers in November. Parent HDFC Bank will sell its shares worth ₹10,000 crore in an offer for sale to comply with RBI norms on compulsory listing of so-called upper layer NBFCs.
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