SEBI slaps Rs 2.75 cr on 4 entities in RDB Rasayans IPO case

Mumbai: Market regulator SEBI today imposed a penalty of Rs 2.75 crore on four entities for fraudulent and unfair trade practices related to the initial public offering (IPO) of RDB Rasayans Ltd. The Securities and Exchange Board of India (SEBI) levied a joint penalty of Rs 2 crore on BMD Exports and its directors Jitendrabhai Ramanbhai Patel and Madhavlal Bechardas Patel.

Besides, the watchdog slapped a fine of Rs 75 lakh on one Prakashbhai Ishwarbhai Rana in the matter. RDB had come out with an IPO of 45 lakh shares at an issue price of Rs 79 each in September 2011. SEBI probed the company's IPO and subsequent trading on and around the listing day as the shares had witnessed wide price fluctuations on the BSE. As per SEBI's show-cause notices, a part of the IPO proceeds was routed in a circuitous manner by RDB to certain loss-making trading clients, which had dealt in the firm's shares.

These clients included BMD Exports and Rana. In two similarly worded orders today, the market regulator said that "it can be concluded that IPO money was routed by RDB through a web of inter-connected entities to make the transaction look complex and hide the actual source of the money in order to enable the noticee to make payments to its stock broker on time, i.e., as per T+2 settlement mechanism." According to Sebi findings, RDB had credited Rs 1.45 to BMD Exports' bank account and had transferred Rs 48 lakh to Rana.