Is ICICI Pru MF buying I-Sec IPO shares right?

 

Shriram Subramanian, founder and MD, InGovern Research Services

If the allegations that there were phone calls made to ICICI (Prudential) mutual fund to bail out the ICICI Securities IPO (initial public offering) were true, it would be gross misconduct on the part of the fund house. (The IPO started on 22 March.)

While the percentage holding and the exposure may be within the stipulated norms, as data shows, ICICI Prudential mutual fund is the largest fund house holder of ICICI Securities. The conflict of interest is apparent, if the issue was subscribed based on phone calls to bail out the issue, rather than an independent decision.

The fund management company should act in the interest of the unit-holders, and it risks its reputation if it has acted otherwise.

Srikanth Bhagavat, MD, Hexagon Capital Advisors

When taking such a call, the institution or fund manager should take extra caution. If possible, such takes should be avoided, because people are bound to make conclusions which may not be good. But it’s a fund manager’s call where to invest and how much, and if the fund manager has a conviction on a particular investment and she believes that it could be profitable for investors, I don’t think there should be any issue. I have not studied the ICICI Securities IPO, so I won’t comment on its investment worthiness.

Shyam Sekhar, founder, ithought

This is not a corporate governance issue because legally there is no provision that prohibits an asset management company from investing in the IPO of its sister concern.

In fact, ICICI Prudential AMC also invested in the IPO of ICICI Prudential Life Insurance Co., which listed marginally above the issue price.

The issue is more about fair pricing and most IPOs are overpriced. This is because they are able to manage the ecosystem by a limited IPO of 10%. This should be done away with and all companies that want to list need to list at the maximum threshold decided by Sebi. As far as the ICICI Pru AMC buying into the IPO of ICICI Securities is concerned, I think we are rushing to a judgment. The jury is still out on this.

Link: Mint- April 25, 2018