SEBI Orders ICICI Mutual Fund to Reimburse Rs 240 crore to 5 MF Schemes
SEBI, the regulator of capital market of India has issued an order against ICICI Prudential Mutual Fund to pay Rs 240 crore back to the 5 mutual fund schemes, whose investments it has used for saving the ICICI Securities IPO from disqualification.
The fund house has broken the mutual fund code of conduct by using the investors' money for its own gain and not in the interest of investors.
SEBI’s code of conduct clearly states that the decisions made by the fund house should be in the interest of investors and the association should not promote any issuer or securities in any way. Let’s find the whole story in detail.
What Actually Happened? Which were the Schemes Involved?
ICICI Mutual Fund has allegedly used Rs 240 crore from 5 mutual fund schemes that include 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, to rescue the IPO on the last day.
The IPO which was initially planned to collect over Rs 4000 crore which was then reduced to Rs 3520 crore in March after weak response from investors. But even after the reduction in size, the IPO was unable to reach the minimum target of 75%, which is required by an IPO to qualify for a release. To reach this target, the AMC which has already invested Rs 400 crore on the first day later made a last minute decision of investing Rs 240 crore on the last day, saving the IPO from disqualification. If this last day investment would not have been made, then the IPO would have only reached a subscription of 70.11%, making it 3.89% short from reaching the stated target of 75%.
The After-Effect- Series of Consequences
Now, SEBI has not only directed ICICI Mutual Fund to repay Rs 240 crore but has also ordered the AMC to pay 15% annual interest on this amount. The regulator has also told the fund house to pay compensation to the investors who have redeemed their investment from these 5 schemes after the poor release of IPO. The ICICI Securities IPO initially released with a price band of Rs 519-520 has fallen short on reaching this target and has shown an all time high of only Rs 463. The stock is currently at a price of Rs 320 (as on Jul 3, 2018) showing a loss of 38.46% to its investors in less than 3 months.
The fund house total investment of Rs 640 crore is responsible for filling half the QIB quota, which require 75% of the total subscriptions to be bought by a Qualified Institutional Buyer for an IPO to be qualified for release. SEBI believes that the last day investment of Rs 240 crore has been made to reach this target.
As of now, there is no particular response from ICICI Prudential Mutual Fund regarding this matter, but let’s hope that this matter gets resolved quickly and investors of these 5 schemes hear some good news.
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