Setting noxious trend!

Hitherto BSE-SME platform had witnessed companies where unknown private corporate bodies as public shareholders controlling larger stake than the promoters. But, now, for the first time, a promoter-less SME is vying listing on the BSE. Astonishingly, the large `public’ shareholders until recently are currently in “Under Process of Striking off Status”! The investment banker, who was allotted 5 lakh shares at par in December 2014, has already sold the shares at par. To whom and when it was sold? The offer document does not disclose the details. The IPO date was announced almost a week ago. But, the final offer document is made available in the net less than 24 hours before the IPO! If this is the way public issues are being managed, what are the regulators doing?

OFFER AT A GLANCE
Name	Oyeeee Media Ltd
Offer Amount	Rs 15.90 cr
Offer Quantity	39.75 lakh shares of Rs 10 each
Offer on Total Equity	26.83%
Post-issue Promo stake	0%
Post-IPO Capital	Rs 14.81 cr
Offer Price	Rs 40
Application Quantity	3000 & Multiples of 3000
Offer Opens	August 13, 2015
Offer Closes	August 19, 2015
Listing	SME Platform of BSE
Rating	Nil
Lead Manager	First Overseas Capital
Market Maker	Alacrity Securities
Underwriters	First Overseas Cap (17%),         Alacrity Securities (83%)
Registrar	Sharepro Services

 

The Offer

The IPO is a fresh issue of 39.75 shares of Rs.10 each at a price of Rs. 40 a piece aggregating to Rs.15.90 cr which will enlarge the company’s capital from Rs 10.84 cr to Rs 14.81 cr. Investors need to apply minimum 3000 equity shares. The IPO is lead-managed by First Overseas Capital. Alacrity Securities has been roped in as market maker. Whereas the lead manager has underwritten 17% (Rs 2.7 cr) of the issue, the market maker, who is subscribing 2.01 lakh shares (Rs 80.4 lakh) in the public issue, has committed to underwrite 83% (Rs 13.2 cr).

 

Issue Object

The objects of the public issue are to finance production of television serials and organizing events Rs 5 cr; to fund production of small budget feature film Rs 4 cr; development & acquisition of contents Rs 3 cr; brand building Rs 50 lakh; general corporate purposes Rs 3 cr and the balance (Rs 40 lakh) is earmarked for issue expenses.

 

Lineage & Credibility

Incorporated in 2008, the Mumbai-registered Oyeeee Media Ltd (OML) claims to be a professionally managed company which does not have an identifiable promoter in terms of the SEBI Regulations. The company’s managing director Raj Saluja (34) and whole-time director Prasanjit Gupta (34) have acquired 1.5 lakh shares each during 2014/2015 from two existing shareholders at par. In other words, the so called professional management will have a minuscule stake of just 2% and a significant portion of the equity will be in the hands of entities whose background and ownership are not known!

What’s more intriguing is, the frequent changing of OML’s top ownership. The offer document reveals that two years ago nine shareholders viz. Devlaxmi Share & Securities Pvt Ltd (36.02%), Maxius Ventures Pvt Ltd (21.19%), Prajan Trading Pvt Ltd (14.83%), Rangoli Commerce Pvt Ltd (8.9%), Ramdev Shares & Securities Pvt Ltd (8.47%), Gupteshwar Finance & Investment Pvt Ltd (4.66%), Raju Lal Gaur (2.54%), Deepak Kasath (1.69%) and Aditya Fashion Pvt Ltd (1.69%) were holding the entire capital.

In September 2014 OML issued 21.15 lakh shares at par to Vinayababu Dasa Ramesh (1,50,000), Kapil Agarwal (2,50,000), Matruchaya Financial Services Pvt Ltd (2,80,000) and its associate companies viz., Frohar Trading Pvt Ltd (4,50,000), FultonCorporate Services Pvt Ltd (2,00,000), and Ekmantra Advisory Services Pvt Ltd (6,00,000), Ranjana Chandak (25,000), Jatan Kanwar (50,000), Sua Kanwar (10,000), Divya Shekhawat (50,000), Abhishek (25,000) and  Abhimanyu (25,000).

In December 2014, the company issued 35 lakh shares at par to Abhyudaya Builders Pvt Ltd (4,40,000), First Overseas Capital Ltd (5,00,000), Melody Residency Pvt Ltd (8,40,000), Plus Jet Finvest Pvt Ltd  (9,10,000) and Softlink Mercantiles Pvt Ltd (8,10,000). A month later (in January this year) another 31 lakh shares were issued at par to two closely-held companies viz. Tarasakti Dealers Pvt Ltd (26,00,000) and Sneha Residency Pvt Ltd (5,00,000).

The draft offer document dated May 30, 2015, revealed that Plus Jet Finvest, Melody Residency, Softlink Mercantiles and Sneha Residency continued to hold their stake in full while Tarasakti Dealers’ stake was reduced from 26 lakh to 6.46 lakh and Matruchaya Financial’s stake was reduced from 2.8 lakh to 1.89 lakh. First Overseas Capital has disappeared from list and Naabhi Trading has come in with 5.1 lakh shares. What price and to whom did First Overseas sell its stake? The offer document does not disclose anything. The investment banker privately clarifies that First Overseas sold its stake at par value to Naabhi Trading.

 

Top Shareholding changed between Draft and Final Document!

Come August 2015. Except Kapil Agarwal (2.5 lakh shares), Raj Saluja (1.5 lakh), Prasanjit Gupta (1.5 lakh) and Vinayababu Dasa Ramesh (1.5 lakh), all top shareholders’ names have changed! As per the final offer document dated August 4, 2015 released just less than 24 hours before the issue opening, only three entities were holing more than the four individuals and they are: Pratyaksh Advisory Services LLP (5.8 lakh shares), Dravite Advisory Services  LLP (4.79 lakh) and Bluedasher Management Services LLP (3.58 lakh). Besides, four more individuals viz Rajshree Choudhary, Ramaswamy Santhamani, Ramesh Kaymal and Ravikant Choudhary with one lakh shares each have also crept in. When did these new stake holders acquired their shares and at what price?    

As per ROC record, a majority of the corporate shareholders of OML are registered in Kolkata. Interestingly, Plus Jet Finvest and Melody Residency are currently “under the process of striking off”! Softlink Mercantiles has common office and directors with Plus Jet Finvest. Tarasakti Dealers, which had invested more than Rs 64 lakh had a paid up capital of less than Rs 2 lakh in 2014. Naabhi Trading to which the lead manager to the IPO claims to have sold Rs 50 lakh worth of shares had a paid up capital of just Rs 1 lakh. Sneha Residency is sharing the same Kolkata address with Melody Residency. Abhyudaya Builders and Sneha Residency have common directors. What’s more, many of these companies have indirect link with hordes of `khoka’ companies.

All the private companies holding OML shares were categorised as public shareholders and since they did not hold individually more than 10% the details of promoters, share holding pattern of those companies were not disclosed in offer document in compliance of SEBI regulations!

 

Frequent Change of Auditors & Registered Office

In five years, OML has shifted its registered office four times!  Initially located at Andheri (West), Mumbai, the registered office was shifted to Vashi, Navi Mumbai, in October, 2010. It was shifted to Malad (West) in March 2013.  The office was further moved to Andheri (East) in August 2014. Once again, in January 2015 the office was shifted to Andheri West.  Also, OML has had three auditors in as many years.  Audit for the financial year ended 31st March, 2011 and 2012 was conducted by Anjaria & Associates. For the financial years 2013 and 2014 audit was conducted by Pawan Mandowara & Co. And, before the public issue Agarwal & Mangal have become the auditor of the company.

 

Financial Track

As regards the company’s financials, though seven year old, OML is yet to find a credible top line, leave alone bottom line, as compared to its equity base. In last five years its operating cash flow has been continuously negative. Almost the entire capital (Rs 10 cr) is deployed as advances. Will the so called professional management with a stake of just two percent change the prospects and profile of the company?