Market regulator Securities and Exchange Board of India (SEBI) has kept the processing of draft papers of Go Airlines’ initial public offering (IPO) in “abeyance”.
The regulator's move comes owing to a pending enquiry against Bombay Dyeing Manufacturing Company Ltd and its promoters, the Wadias.
Go Airlines, which has rebranded itself as “Go First’’, had filed preliminary papers for an initial share sale worth Rs 3,600 crore in May.
Bombay Dyeing and its promoters had received a show-cause notice earlier this month from the Corporation Finance Investigation Department (CFID) for alleged irregularities, Moneycontrol reported citing a person familiar with the matter.
CFID, a special department of SEBI, carries out preliminary and detailed investigations on fraud, diversion or siphoning of funds in listed companies.
Another person aware of the issue told Moneycontrol that Go Air had sought an exemption from SEBI and requested the regulator to process the issue. Typically, SEBI vets documents and only after its approval can an issuer announce a date for its IPO.
What happens next?
The issuance of observations by SEBI implies the IPO is approved. SEBI usually gives its observations on IPO papers in 30 days after scanning through documents submitted by companies before giving them the go-ahead for an IPO. SEBI’s queries to investment banks on an offer document are common.
An IPO issue is kept in abeyance when there is a violation of serious nature. It could take over a month for the company to address the issue before the regulator restarts the vetting process. This could delay the airline’s fundraising plans.
SEBI can keep the matter in abeyance for 30 days if it feels that there is a possible cause for investigation or investigation is already in progress, but without a show-cause notice being issued. The time period could be further extended by 30 days or till the investigation concludes.
In case a show-cause notice is issued, SEBI can keep the process in abeyance for 90 days and can extend by 45 days or till the conclusion of the proceedings.
