Sebi slaps Rs 10 lakh fine on Corporate Professionals in ECE Industries delisting matter

Markets regulator Sebi on Thursday slapped a fine of Rs 10 lakh on merchant banker Corporate Professionals Capital for incorrect calculation of the floor price in the delisting offer of ECE Industries, which misled investors in arriving at the actual offer price. Due to this incorrect calculation, some investors would not have even participated in the delisting process, Sebi noted.

The regulator conducted an examination into the alleged irregularity in the matter of ECE Industries to ascertain any possible violation during the period between December 2016 and January 2017. It found that for the purpose of calculating floor price, Corporate Professionals Capital had taken the average market price for each trading day and then did a simple average of such daily price for 60 trading days, as against the volume weight to be given for each and every trade during the past 60 trading days' period.

The actual floor price should have been Rs 233.66 and not Rs 202.56, as computed by the merchant banker and the incorrect floor price computed by it had resulted into delisting offer price of Rs 204, which was lower than the correct floor price of Rs 233.66 as per the Sebi's delisting regulations. "The incorrect calculation of the floor price by the notice (Corporate Professionals Capital) had misled the investors in arriving at actual offer price due to which some investors would not have even participated in the delisting process," Sebi said.

Consequently, the regulator imposed a penalty of Rs 10 lakh on the notice. In a statement, Deepika Vijay Sawhney, advocate for Corporate Professionals Capital, said the incorrect remarks pertaining to loss of investors or misleading the investors were not even alleged in the show-cause notice.

"... the order unwarrantedly stains the merchant banker with such grave remarks," Sawhney said, adding that the merchant banker can certainly seek appropriate remedy available under law in these facts and circumstances of the case.