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SEBI indicts JM Morgan, IL&FS in Balaji Tele case

Securities and Exchange Board of India has indicted JM Morgan Stanley Pvt Ltd, IL&FS Merchant Banking Ltd and Ketan Parekh's Triumph International Finance Ltd for violation of merchant banking regulations on a merger proposal of TV software company Balaji Telefilms Ltd with Nine Network Entertainment Ltd.

SEBI said the violation of due diligence obligations was the first case of the offending companies where action could be initiated against them. The firms however, were let off with a warning.

In its inquiry against JM Morgan, IL&FS and Triumph, lead managers to BTL's IPO, the regulator found that none of them had raised the issue of implications of merger proposal on the disclosure made in the prospectus nor had questioned the development, when they became aware of it.

A SEBI release said these lead managers did not alert the regulator "as soon as" they came to know of merger proposal.

In its offer document for a public issue in October 2000, BTL had stated that it did not have any plans to alter capital structure within six months of opening of the IPO, SEBI said.

However, despite the disclosure in the prospectus, BTL board gave an "in principle" nod for a merger with Australian media moghul Kerry Packer promoted Nine Network on November 21, 2000.

BTL had floated an IPO of 2.8 million shares at Rs 130 per share through 90 per cent book building route, which opened on October 6 and closed on October 12, 2000.

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