So Icici securities comes out with an IPO with a price band, right?

What is the price band? Well, that is purely academic, it was not a worry at all. The issue was expected to be fully subscribed at the upper end price of Rs. 520.

From where did they get this confidence? From the pots of money that all the associated companies of Icici bank have/had.

So fine. However, on the last day / penultimate day they find that there is a shortage of Rs. 240 crores. Chicken shit for a fund house with Rs. 200,000 crores. I just learnt today that you should always see it as a percentage. So 0.1% of the aum should not matter, right? Well, so what’s a couple of hundred crores to help a fellow colleague? So the amc wrote out a cheque…and took some more shares. Well if a “Value Discovery” fund invests in a fund which has money buys these shares in its portfolio. Obviously something is wrong. Yes it was stinking.

What would have happened if the amc had not bailed it out?

The issue would have failed. Wait a minute. The company would have had to go to a lower price band. Say Rs. 500? or maybe 489…who knows?

Now the people who over paid are stuck with that. The lucky people are the unit holders of Icici’s various schemes. However Hdfc’s unit holders will not be so lucky. They are stuck with a nice drop…from 520 to Rs. 309 as of today. This is a 40% fall in less than a month.

What Sebi has done is a compromise between looking strict and not hurting Icici. Remember the bank is a powerful player. The mutual fund is the BIGGEST fund, remember that. However, Sebi has to look like it has done something.

So a rap on the knuckles is what it gets.

My take:

Fund Managers should not talk about Corporate Governance.

I am happy that I say No to board positions. I am sure I have missed more than Rs. 10 million in sitting fees.

I am saddened by what has happened. I am not worried about what happened in Icici Pru. I am worried about what could be happening in other mutual funds with other IPO. Will we ever know about such Ready Forward deals? Will debt managers not be tempted to fund such deals – against the security of a bloated share?

When I meet some of the biggies in the Sarkar they ask me “why is our penetration of equity so low”. Think of all these reasons. Do not just say “Indians are not educated enough”. Maybe they know something about risk that we do not.

It is not to think that I feel that Icici Prudential has been dipped in Dettol and is clean. No. I am surprised that such a small deal they did it in their books – the reason why it came out. The bank has enough people on whom to call a favor for this kinda money. One call to a big client would have silently bailed out the issue. Sadly, they had to resort to something which looks so damn slimy.

Saddened more than Angry.

Happy that this is happening at the end of my corporate life. In 10 years I will be senile, I will not know the fate of the Icici Securities company.