Premier Energies’ Promoters Sells 30.6% of Issue to Select Few Entities 5 Days Before IPO Opens
Moneylife Digital Team 30 August 2024
The ongoing initial public offering (IPO) of Premier Energies Ltd (PEL) has raised questions about Securities and Exchange Board of India (SEBI)’s rules and regulations governing IPOs. PEL’s IPO opened on 27 August 2024, offering 62.8mn (million) shares in a price band of Rs427 to Rs450 a share. However, just five days before the IPO opening, the company sold 19.2mn shares or about 30.6% of its IPO size, on 22 August 2024 to a select group of individuals, mutual funds, foreign institutional investors (FIIs), life insurance companies and corporates at Rs450 per share, the upper end of the price band. This was not disclosed at the time of the IPO.
 
No disclosure of such material information during the IPO meet
 
 
As of 3.49pm on 29 August 2024, the IPO closing date, the issue was subscribed 73.66 times. In light of such huge demand, the sale of shares on 22 August 2024 disadvantages IPO participants by favouring a select group of investors and undermining the book-building process. 
 
SEBI has limited the anchor investor portion of an IPO to 30% of the total IPO size. This also raises the question of whether this sale violates SEBI’s rules around anchor investors. Moreover, as a number of mutual funds have participated in the purchase of shares of a company that was not publicly listed at the time of purchase, it raises the question of whether such funds were eligible to purchase PEL’s shares before the IPO.
 
We have asked the market regulator SEBI if PEL selling 19.2mn shares just five days before opening its IPO defeats the purpose of a transparent book-building process. 
 
Another question we asked is related to the management action, which is a clear disadvantage to the investors who oversubscribed the IPO. While the anchor book itself is limited to 30% of the total issue size, what is the legal standing of this allotment which exceeds the size and time limit of the anchor book?
 
A number of mutual funds have participated in this allotment of a company that was not publicly listed at the time of allotment. Is it legal for such entities to participate in this allotment? 
 
We have asked SEBI if it is investigating this issue, which is now in public domain, and whether it will take steps to annul it. We will update the report when we hear from SEBI.
 
Premier Energy is an integrated solar cell and solar module manufacturer with 29 years of experience in the solar industry. Its business operations include manufacturing solar photovoltaic (PV) cells, solar modules, sale of customisable and ad hoc solar-related products, execution of solar projects, operation & maintenance (O&M) services for projects executed by PEL and independent power production through its 2MW solar power plant in Jharkhand, India.
Comments
r_ashok41
1 month ago
sebi and rbi etc finance dept people wake up as to what is happening and make your stand clear otherwise this will send a precedant and lot of other IPO personnel will start doing similar
ppindia18
1 month ago
cancel the IPO and return the money.
amul285
1 month ago
No check by SEBI ,Companies are fooling people in name of IPO and bank gets Money blocked 3to 5 days ;so all is good in these bad circumstances. All manupations
balumul
1 month ago
The IPO is not book-built at all! The issuer has gamed the system...
kalemohan
2 months ago
? is it not cheating?
r_ashok41
2 months ago
This is gross violation of the transparency act and SEBI should intervene and cancel the IPO which should ensure that in future companies do not resort to this kind of tactics to take investors for a ride .If they wanted to do it they could have it before the IPO and what prevented them not to do it .Something is fishy
SVR
2 months ago
The issue raised with SEBI is very much relevant as it makes the principle and process of book building and price discovery mechanism a real mockery. Transparency and book building are incorrectly worded expressions here as they lack a logical explanation & reasoning for such a narrow range of upper and lower price bands which do not vary even by 5% and mostly the issue price would be at upper band unless the subscription is quite poor. In principle it negates the transparency & price discovery with such narrowly spanned price bands, which for all practical purposes is pre-fixed by the issuer or their book managers at upper end except for an odd flop show.

2. Even the 30% pre-IPO anchor investor book should ideally be alloted on some logical allocation basis within a limited time window immediately after appointment of book running lead managers, at a price of min. 10% on and above the upper price band which would be decided subsequently after the closure of the book - for the exclusivity and prior & firm allotment enjoyed by such entities. Such an element of uncertainity and additional premium has to be extracted by the issuer duly backed by enabling SEBI guidelines, to extend a more liberal treatment to those participate in the actual IPO
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