Markets regulator SEBI is believed to have found ICICI Prudential Mutual Fund in violation of rules during the last day bidding for IPO of the group firm ICICI Securities and has asked the fund house to pay back Rs 240 crore, with 15 percent interest, to its five schemes from which the money was taken for the shares.
Besides, the fund house has been asked to pay the investors, who have redeemed their units since allotment of shares in the initial public offer, after calculating the loss incurred by the respective schemes due to fall in the ICICI Securities share price, sources said.
Investors will need to be given an interest of 15 percent, SEBI has said in a letter to ICICI Prudential AMC.
When contacted, the fund house declined to comment.
Sources said SEBI has found that the act of ICICI Prudential, its CEO and the respective fund managers was not in the interest of unit holders. It was also in violation of mutual fund rules related to code of conduct and due diligence in revising its bids and putting in more money to help save the IPO on the last day, they added.
In March, ICICI Securities came out with its IPO for 77,249,508 shares, with a price band of Rs 519- 520. It had reduced the size of the offer to a little over Rs 3,500 crore after the sale elicited a sluggish response, especially from high net worth individuals.
The share sale of the leading brokerage firm – which was to raise up to Rs 4,016 crore – received around 88 percent subscription, including the anchor portion, on the last day of the bidding.
ICICI Prudential Mutual Fund under five of its schemes -- ICICI Prudential Balanced Advantage Fund, ICICI Prudential Balanced Fund, ICICI Prudential Banking and Financial Services Fund, ICICI Prudential Focused Bluechip Equity Fund and ICICI Prudential Value Fund Series 19 -- applied for and was allotted 123.08 lakh shares at a price of Rs 520 apiece, totalling Rs 640 crore in the Qualified Institutional Buyer category.
Out of the application for shares worth Rs 640 crore, Rs 400 crore was applied on the first day of bidding and Rs 240 crore was applied on the last day.
According to the letter, the decision to revise bids and make additional bids amounting to Rs 240 crore on the last day is a clear indication of facilitating subscription in the QIB portion so that the issue does not fail.
If the last day subscription by ICICI Mutual Fund is not considered, the total qualified institutional buyer subscription would have been amounted to 70.11 percent of the offer size as against the required 75 percent for the issue to be successful in terms of SEBI's regulation.
Further, without the last day subscription by ICICI Prudential Mutual Fund, ICICI Securities' IPO would have failed and the fund house has thus facilitated its sponsor ICICI Bank to divest its stake in the brokerage house, the letter said.