SEBI seeks detail on IPO Financing: BharatPe Vs Kotak

The market regulator (SEBI) has initiated a primary investigation into the recent spat between BharatPe co-founder Ashneer Grover and Kotak Mahindra Bank over the financing of Nykaa’s (FSN E-Commerce Ventures Ltd) initial public offering (IPO).

The move comes shortly after the controversial call happened among BharatPe cofounder Ashneer Grover, wife Madhuri Grover and the bank over the financing of Nykaa’s IPO.

Grover and his wife Madhuri Grover are seeking damages for Kotak Mahindra Bank’s inability to provide financing worth INR 500 Cr during Nykaa IPO.

SEBI wants to ascertain whether there was any conflict of interest between Grovers and Kotak Bank, and why the bank failed to provide financing or intimate them about the failure

The fact is , IPO financing is a contract between an investor and a financier, under which the investor proposes to borrow money to buy shares during a public offer. SEBI is reportedly seeking a response from Kotak Wealth on why Kotak’s relationship managers were making guarantees on the allotment.

The SEBI wants to ascertain whether there was any conflict of interest. This is further in line with Kotak starting an internal investigation on its relationship managers, to know if there was any violation of the ethical code of conduct or any instance of misselling.

The legal notice has surfaced a week after a leaked audio clip in which Grover is heard hurling abuses and threats to one of the bank’s relationship managers.

The bank is said to have made repeated representations regarding its ability to provide IPO financing. “Had Kotak informed our clients at the very beginning that it would be unable to provide IPO financing for the Nykaa IPO, our clients would have approached other financiers who were ready and willing to provide IPO financing to our clients for this IPO,” the legal notice sent by Grovers to Kotak Bank reportedly said.

Soon after the notice to Kotak, the reply which authenticated Grover’s misdemeanour with the Kotak employee, he went on voluntary leave. While the reason is unknown, it further sparked controversy as to whether it was a voluntary or board action against Ashneer.