Shares of JM Financial plunged 19% on Wednesday to the day's low of Rs 77.55 after the Reserve Bank of India (RBI) barred JM Financial Products from undertaking any form of business in shares and bonds funding due to regulatory violations and governance lapses, said a strongly-worded letter issued by the banking regulator on Tuesday.
With today's fall, the stock's losses have extended to 22% as it declined for the fourth straight session.
The RBI statement directed JM Financial Products to “cease and desist", with immediate effect, from doing any form of financing against shares and debentures, including sanction and disbursal of loans against Initial Public Offering (IPO) of shares as well as against subscription to debentures.
JM Financial has strongly denied claims of lapses and violations made by the regulator.
The RBI said the company can continue to finance its existing loan accounts through collection and recovery.
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JM Financial Products is a systemically important non-banking finance company registered with RBI and 99.71% is owned by the stock exchange-listed JM Financial Ltd. It is focused on capital market, bespoke, and real estate financing.
RBI said this action is necessitated due to certain serious deficiencies observed in loans sanctioned for IPO financing and as non-convertible debentures subscriptions.
A statement issued by JM Financial said, There have been no material deficiencies in our loan sanctioning process. The company has not violated applicable regulations…. there have been no governance issues whatsoever.”
The company has a loan book of Rs 4,600 crore and assets under management of Rs 7,197 crore at the end of the third quarter for FY24, according to the stock exchange disclosures.
While conducting the limited review, the RBI observed that “the company repeatedly helped a group of its customers to bid for various IPO and NCD offerings by using loaned funds. The credit underwriting was found to be perfunctory, and financing was done against meagre margins.”
The banking regulator’s order also noted that the “application for subscription, the demat accounts and the bank accounts, all were operated by the company using a Power of Attorney (POA) and a Master Agreement obtained from these customers without their involvement, whatsoever, in the subsequent operations.”
The RBI pointed out that due to this arrangement, “the company was able to effectively act as both lender as well as borrower. The company also acted as the arranger of bank account opening as well as operator of the said bank accounts using the POA.”
In response to this, JM Financial stated, “We have been in the business of funding IPOs over the last two decades. The IPO financing product is short-term and self-liquidating in nature. In the context of IPO funding, the POA is taken as a risk containment measure only. The practice of taking POA is prevalent across the industry and is perfectly legal.”
The banking regulator stated that these are regulatory violations and raise serious concerns about governance issues, which are detrimental to customers' interests. The RBI will review business restrictions on the completion of a special audit to be instituted by the RBI and after rectification of deficiencies to the satisfaction of the RBI.
JM Financial also stated, “All our business and operational affairs in a bonafide manner. The company shall continue to service its existing customer". JM Financial also stated, “All our business and operational affairs in a bonafide manner. The company shall continue to service its existing customers as advised by the RBI.”
Meanwhile, ET reported that Sebi is set to come out with an order on JM Financial for its alleged role in inflating IPO subscription numbers.
Sebi has observed certain malpractices being adopted in primary market activities in relation to IPO subscription numbers, said a person close to the development. It has found three merchant bankers, including JM Financial, indulging in inflating the application numbers during IPOs. Read here
FAQs
Shares of JM Financial plunged 19% after RBI barred JM Financial Products from undertaking business in shares and bonds funding. RBI directed JM Financial to cease and desist from financing against shares and debentures. The stock has been on the downtrend for the fourth straight session.
Why is the JM Finance share price falling? ›
The Sebi order against JM Financial came after it found some serious lapses while the company acted as a lead manager for a particular public issue.
What is the RBI action on JM Financial? ›
The Reserve Bank of India has today, in exercise of its powers under section 45L(1)(b) of the Reserve Bank of India Act, 1934, directed JM Financial Products Limited (JMFPL or 'the company') to cease and desist, with immediate effect, from doing any form of financing against shares and debentures, including sanction ...
What is the action of Sebi on JM Financial? ›
SEBI's decision came a day after RBI barred JM Financial from lending against shares and debentures citing regulatory lapses. Mumbai: The Securities and Exchange Board of India (Sebi) on Thursday barred JM Financial from acting as a lead manager for any new public issue of debt securities.
Who is the owner of JM Financial? ›
JM Financial Limited, the flagship listed company of the Group, is led by the Group Chairman, Mr. Nimesh Kampani. The members of the Board meet periodically to discuss and review the performance of the Company.
Is it good to invest in JM Financial? ›
Fund Performance: The fund's annualized returns for the past 3 years & 5 years has been around 25.4% & 23.62%. The JM ELSS Tax Saver Fund comes under the Equity category of JM Financial Mutual Funds. Minimum Investment Amount: Lump sum minimum amount for JM ELSS Tax Saver Fund is ₹500 and for SIP, it is ₹500.
What is the dividend of JM Financial in 2024? ›
Financial Services stocks do not always pay a dividend but as JM Financial Ltd pays dividends to reward its shareholders. In the quarter ending March 2024, JM Financial Ltd has declared dividend of ₹2 - translating a dividend yield of 2.29%.
What is the issue with JM Financial? ›
In March, SEBI accused JM Financial of incentivizing certain investors to apply for public issues and executing transactions in a predetermined manner to ensure subscription and success. It noted that significant NCD allocations were made to retail investors, who sold these securities on the listing day.
How can I get refund from RBI? ›
Within 4-7 days: If you register your complaint after 3 days and between 7 days of the fraudulent transaction, then you will have to bear the limited liability of INR 5,000 to INR 25,000, whichever is lower. After deducting the lowest amount, the rest of it will be returned to you.
What is the old name of JM Financial? ›
The Company was incorporated as a private limited company on 30th January 1986 in the name of J M Share & Stock Brokers Pvt. Ltd.
Mumbai, November 24, 2021: JM Financial Products Limited, the flagship NBFC arm of the JM Financial Group announced the launch of Bondskart.com, a one-of-its-kind intuitive digital investment platform that offers investors access to an extensive array of debt securities, paving the way for hassle-free investments.
Who is the CEO of JM Mutual Fund? ›
Amitabh Mohanty is the Managing Director and CEO of the JM Financial Mutual Fund business in India. He brings with him rich and varied experience of over two decades and his previous assignment was with Karvy Capital Limited.
How does SEBI protect investors? ›
Educating investors about the securities markets and their intermediaries. Preventing fraudulent and unfair practices in the securities market. Overseeing company takeovers and share acquisitions. Ensuring the securities market remains efficient and current through research and development.
Why is JM Financial stock falling? ›
JM Financial share price, JM Financial Sebi order news: JM Financial shares declined on Friday, June 21 after markets regulator Sebi confirmed its interim directions to bar JM Financial from acting as a lead manager for public issues of debt securities until March 31, 2025, in a case of alleged irregularities in a ...
What is the net worth of JM Financial owner? ›
Nimesh Kampani's personal wealth is valued at US$ 595 million, making him the 83rd richest person in India. The Kampani family's combined direct and indirect equity ownership of JM Financial Ltd is between 60% and 65%.
How many branches of JM Financial are there in India? ›
JM Financial Services has 33 offices across 13 states & 23 cities in India.
What is the target price of JM Financial share in 2024? ›
If we look at the share price target forecast JM Financial Share Price Target 2024, the 1st Price Target is ₹85 and the 2nd Price Target is ₹150.
Why stock prices are falling? ›
Stock market crash: Rising US dollar and Treasury yields, disappointing US retail sales data, falling Indian National Rupee (INR), and rising crude oil prices are some other reasons that have fueled the selling pressure in the Indian stock market.
Why are banks stocks falling? ›
Interest rates that spiked in 2022 and last year — driven by Federal Reserve policy to tame inflation in the pandemic's wake — created a host of challenges for banks big and small. That included a surge in deposit costs, curbed loan demand amid high borrowing costs and increased potential for credit losses.
What is the price of JM Finance today? ›
Share Price Update. JM Financial Ltd. share price moved down by -2.23% from its previous close of ₹84.39. Last traded price is ₹82.51.
