Coal India IPO brokers penalised

Sebi has said that Coal India IPO investors must be compensated for non-receipt of shares.

The Securities and Exchange Board of India (Sebi) has directed syndicate members,that handled the initial public offer (IPO) of Coal India,to compensate investors for non-receipt of shares. Around 12,000 applications did not receive any shares due to the syndicate member’s inability to upload investors IPO application forms. Syndicate members are the broking houses distributing IPOs and are responsible for the timely updations of IPO applications on the stock exchange platformthe NSE as well as the BSE.

The regulator has apparently asked these syndicate members to compensate investors in the form of Coal India shares or money equivalent to the difference between the IPO issue price and the opening price for the number of shares under consideration.

So far we have received 10,000 to 12,000 complaints from investors for non-allotment of shares,due to lapse on the part of syndicate members, said a senior Sebi official. Where ever we have received complaints from investors,we had directed the respective syndicate members that have handled the application form of investors to compensate them, he said.

Since fresh issue of shares is not possible,Sebi official said they can do it either by purchasing shares from the open market and give them to the aggrieved investor or else they can compensate by way of cash,the difference between the issue price and opening price,adding that this is for the first time the regulator has received such large number of investor complaints in a single IPO. The Rs 15,000 crore Coal India IPO had attracted about 15.6 lakh retail applications,the highest by any offering this year.

A senior official at Link Intime,which acted as the registrar to the issue,also confirmed the development seeking anonymity. Some syndicate managers have been asked to compensate but we being a registrar are not party to this, he said.

However,market experts attribute the lapse on the part of syndicate members to the sheer size of the IPO. There are errors in almost all issues as we work under tremendous pressure. Sometimes the errors are on the part of investors,while others on the brokers part he said. If error is at the brokers end and Sebi asks us to compensate,then we will have to do so, said a syndicate member involved in the issue,who didn’t wish to be quoted.

The IPO was subscribed 2.31 times under the retail portion. As a result investors received allotment for a little less than half of what they had bid for. All investors made tremendous gains on the day of listing as the stock closed with a 40% premium from its issue price. The stock had closed at Rs 342 versus its issue price of Rs 245 per share on its debut. Retail investors were allotted shares at a 5% discount to the issue price.