Capital market regulator Sebi has widened the scope of its investigation to probe misuse of fund or price manipulation by some of the companies that came out with IPOs last year.

Sebi's integrated surveillance department and investigation department have short-listed 19 companies that were listed in 2011, said a person familiar with the probe. This is in addition to seven companies and a few merchant bankers who were pulled up by the regulator in December 2011.

"In the past few weeks, exchanges have been told to share bidding details, merchant bankers have been asked to provide due diligence details and some companies have been directed to give details on the utilisation of fund proceeds," said the person.

"Soon, banks will be told to give account statements. It will take some time to complete the investigation." Sections of brokers and intermediaries may also come under the probe.

Within a short time, stock prices of most companies that figure in Sebi's list have dropped significantly from prices at which the shares were issued.

Sebi has taken recent initiatives to bring down instances of manipulation in IPOs. It has formed a forensic accounting unit under its corporate finance department to step up the rigour in inspection.

It also introduced listing-day circuit filters to rein in price swings on the listing day and mandatory reporting of merchant bankers' track record.

In the recent cases that are being investigated, sources said the regulator has come across instances where a few thousand IPO applications came from the same set of investors in most of the small-sized IPOs. "It will be probing if there are any KYC issues," sources added.

Most of these are dummy applications and investors who lend their names are provided an assured return by operators. Operators and brokers end up controlling thousands of applications to influence the price of new listings with low floating stock.

"While Sebi's December order restrained companies and its promoters from accessing markets in some cases, investors' continue to remain in losses. There should be a way to compensate investors without causing moral hazard," said Ashok Bakliwal, president, Bombay Shareholders Association.

But market sources said that on charges like fund misuse, the ministry of corporate affairs (MCA) has to step in. "Many companies are yet to deploy the IPO proceeds as stated in the DRHP. Some of them have not even informed exchanges in a timely manner to update the status of funds raised," said a source.

"While the statement of IPO proceeds is filed with stock exchange, it is the MCA that has the power to take action against erring companies. Filings on RoC happen with a lag of 12-18 months which make monitoring difficult. Most independent directors, who are supposed to defend shareholders' interests, are found to be ineffective.

There should be a detailed format that provides specific details about the investments with status of the project for which funds were raised," said Pavan Kumar Vijay, MD of Delhi-based Corporate Professionals. (Economic Times)