Sebi to review guidelines for follow-on offerings

With the primary market on the revival path, market regulator Sebi is closely looking at a gamut of issues related to the primary market in ...

With the primary market on the revival path, market regulator Sebi is closely looking at a gamut of issues related to the primary market in a bid to expand the equity cult and make the market more efficient and transparent.

As part of this exercise, Sebi is planning to revisit the norms governing follow-on public offerings (subsequent public offers by companies after IPOs). ‘‘We will make the guidelines easier for investors. If any changes are required, we will do it,’’ Sebi Chairman M. Damodaran told The Indian Express.

The Sebi chief’s statement significance as some of the follow-on offerings had fallen below the market price after the issue. However, Sebi is not looking at revamping the book-building route for initial public offerings (IPOs). ‘‘Qualified institutional investors (QIBs) make the payment on allotment. This is an international practice. Once QIBs make a commitment, they can’t go back on it,’’ Damodaran says on complaints about QIBs — unlike retail investors — putting no money upfront in IPO applications.

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Sebi had convened a meeting of merchant bankers recently and made it clear that they will have to take the responsibility for issues launched by them. ‘‘Sebi just gives its comments on the offer documents. It’s the responsibility of merchant bankers to ensure full disclosure of the issuer,’’ he says.

Sebi has not stopped small companies from coming out with IPOs. It’s looking at small IPOs more closely as several companies which came out with IPOs in the 1990s had disappointed investors.

When asked whether Sebi is planning rating of IPOs, the Sebi chairman said: ‘‘We’re not going to make it compulsory as of now. If companies go for rating on their own and and publish it, it’s okay with us.’’

The proposal for rating IPOs came from several quarters in order to warn investors about the quality of IPOs. Rating firm Crisil had rated some IPOs but these ratings were not disclosed by the companies.

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The Sebi chief admitted that the proposed Central Listing Authority (CLA) is in limbo. CLA, initiated by the then Sebi Chairman G.N. Bajpai in 2002, was to look into listing agreements and carry out due diligence. The proposed authority was supposed to lay down standard listing processes and keep them updated, depending on environmental developments — internal and external — and also the needs of the corporates and investors.

‘‘CLA would have made more sense when the regional stock exchanges were active a couple of years ago. Sebi is anyway doing the things which the CLA was supposed to do. But we have not scrapped the plan,’’ Damodaran says.

In fact, Sebi has been periodically reviewing the IPO guidelines and processes. It’s now in the process of working out an easier exit route for small companies from the stock exchanges.

Insider trading

		MUMBAI: Insiders, beware. Rumours of insider trading fly thick and fast whenever a takeover or merger deal is announced in India. Proving an insider trading case is considered a tough job among regulators across the world and the success rate of proving insider trading cases is virtually zero, but Sebi is not giving up. ‘‘We will go after the person if solid evidence of insider trading is available,’’Damodaran said. — ENS