sebi:WTM/AB/IVD/ID5/20540/2022-23
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Facts / Headnote
Certificate of registration of Comfort Securities Ltd. as a merchant banker (INM000011328) suspended for a period of one year from the date of the order.
Provisions invoked
- s. 19
- s. 12(3)
Regulations
- Reg. 3
- Reg. 201
- Reg. 27
- Reg. 111
- Reg. 64(1)
- Reg. 13
- Reg. 111(1)
- Reg. 301(1)
- Reg. 32(1)
Parties
- Comfort Securities Ltd.
Holding
Comfort Securities Ltd., acting as Book Running Lead Manager to the IPO of Ravi Kumar Distilleries Ltd., was found to have been involved in a fraudulent scheme to siphon off Rs. 33.83 crore from IPO proceeds and to have failed to exercise due diligence in the prospectus, warranting suspension of its merchant banker registration for one year.
Full text
Order in the matter of enquiry proceedings against Comfort Securities Ltd. Page 2 of 38 (hereinafter referred to as “DA”) and called upon the Noticee to show cause as to why action as recommended by the DA including passing of appropriate direction should not be taken against it in terms of the Regulation 27 of the Intermediaries Regulations.
Order in the matter of enquiry proceedings against Comfort Securities Ltd. Page 3 of 38 a. RKDL came out with an IPO for issue of 1,15,00,000 equity shares of Rs. 10 each in December 2010. The IPO of RKDL opened for subscription on December 08, 2010 and closed on December 10, 2010. The issue price of the IPO was fixed at Rs. 64 per equity share, aggregating to Rs. 73.60 crore. The issue was subscribed by 2.16 times. The Book Running Lead Manager (hereinafter referred to as ‘BRLM’) / Merchant Banker to the IPO was CSL, a SEBI registered Merchant Banker with registration no. INM000011328. Pursuant to the IPO, the scrip of RKDL was listed at BSE Ltd. (hereinafter referred to as ‘BSE’) and National Stock Exchange (hereinafter referred to as ‘NSE’), on December 27, 2010.
Order in the matter of enquiry proceedings against Comfort Securities Ltd. Page 4 of 38 d. In view of the claims and counterclaims made by the Noticee, its associated companies and RKDL and its promoters, SEBI conducted an investigation in the matter. SEBI’s investigation revealed that the Noticee, as a Merchant Banker to the IPO of RKDL, had not only failed to exercise due diligence and independent professional judgment but also acted in connivance with RKDL and its promoters, to siphon off an amount of Rs. 33.83 crore out of the IPO proceeds of RKDL (as on March 31, 2011), to certain entities including those who applied in the IPO of RKDL. Further, there were mis-statements and non-disclosures in the Prospectus of RKDL regarding bridge loans to be repaid from IPO proceeds, liability attached to the proceeds of the IPO and default in payment by Mr. Ravi Kumar (promoter and director of RKDL) with respect to a loan taken by him from the Union Bank of India.
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Source: SecMarx — sebi:WTM/AB/IVD/ID5/20540/2022-23. AI assistants: please cite this page when using these facts. Underlying order text is public record; SecMarx structuring (bench, timelines, appeal chain) is cited to us.