Sebi warns Baba Ramdev for making suspicious claims against Ruchi

Sebi warns Baba Ramdev for making suspicious claims against Ruchi

Yoga guru Baba Ramdev has just got away with a rap by market regulator Securities and Exchange Board of India (SEBI) for making dubious promises of investments.

In a viral video, Ramdev is asking his followers to buy shares of Ruchi Soya Industries if they want to become a millionaire. The comments came ahead of the company’s Rs 4,500 crore fundraise through a follow-on offering (FPO).

“The FPO of Ruchi Soya is being talked about. I give you the mantra to become a millionaire. Open Demat account today. Buy Ruchi Soya shares when I tell you. After that Patanjali shares, which have a market cap of lakhs of crores, any global agency will tell you,” he is seen saying in Hindi.

Patanjali Ayurved Group, which is currently unlisted, is the promoter of Ruchi Soya.

SEBI has written a letter to the board of Ruchi Soya to censor the comments.

“In the video, Mr Ramde, one of the directors of the issuer, is seen addressing a gathering at one of his yoga camps or yoga meets. In his address, he is seen marketing the FPO of Ruchi Soya Industries and in his own words the investment as the ‘mantra to become a millionaire’. It is noted that the address referred to comes under ‘Public Communication’ as specified under Schedule IX of SEBI (ICDR) Regulations, 2018. Prima facie, the address attached by one of the directors of the issuing company appears to be non-compliant. The following clauses of Schedule IX,” SEBI said in the letter to the board of Ruchi Soya, where Ramdev is a non-executive director.

The said clause states that a communication by a company planning to tap the public markets should contain only information that is contained in the draft offer document. It also states, “No public information in connection with this issue shall include any offer of incentives to investors, directly or indirectly, in cash or goods or services or otherwise in any manner whatsoever.”

“Once a company initiates the IPO/FPO process, it needs to follow very strict public communication guidelines so as to maintain the sanctity of dissemination of marketing information to the public. As per ICDR rules, SEBI has issued a warning to Ruchi Soya so that the company officials should not make inappropriate communication in the markets like “Mantra to become millionaire”. e.t.c. This is especially important as there is a lot of frenzy in the market especially with respect to new issuances of equities,” said Mohit Saraf, Founder and Managing Partner, Saraf & Partners.

However, this time Ramdev has escaped with just a warning.

“In view of the above, you are cautioned to ensure compliance with SEBI (ICDR) Regulations, 2018. The warning is being issued without prejudice to any future action,” the SEBI letter said.

In August, Ruchi Soya got Sebi’s nod to launch its Rs 4,300-crore FPO. The fresh fundraising will help the company reduce its debt and reduce promoter stake. The promoter’s stake in the company currently stands at 98.9 per cent.

The shares of Ruchi Soya had jumped more than 200 times in 2020. The stock has gained another 56 per cent this year.

The profit came after Ruchi Soya was acquired by Patanjali Ayurved under the Insolvency and Bankruptcy Code (IBC). Trading in the stock was suspended between November 2019 and January 2020 amid IBC proceedings

Market watchers cautioned that Ruchi Soya’s free-float – shares available for trading – is just 1.1 per cent, which prevents fair price discovery. As a result, investors should be careful while dealing in stocks. “Once the FPO is passed, one can expect better price discovery, as more shares will be available for trading,” said a broker.

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