MUMBAI, DECEMBER 16: The scam-hit primary issue market is active again. Infotech companies, both known and unknown entities, are flocking to the new issue market wooing investors with initial public offerings (IPOs). In a bid to take advantage of the ongoing infotech boom, at least four infotech companies have filed their IPO documents even as the Securities and Exchange Board of India (SEBI) cleared the IPOs of three other infotech companies during the week ended December 3.This is only the beginning of the infotech IPO boom. "Another two dozen infotech IPOs are in the final stages of preparation. These companies will submit their offer documents to the SEBI in the next two or three weeks. Most of these IPOs are floated by unknown promoters," said a merchant banker.Indian markets woke up to the potential of software only two years ago, but technology-related stocks now accounted for 60 to 70 per cent of trading volumes, analysts said. The reason for the sudden entry of infotech IPOs is the phenomenalrise in the share prices of companies like Infosys, NIIT, Pentafour, Satyam and Mastek. Most of these scrips had appreciated by four to six-fold in the last one year.In terms of market capitalisation, technology stocks had increased their share in the overall market capitalisation to around 30 per cent from five per cent two years ago. ``Investors are lapping up any stock with the software tag. Some of the infotech companies are not genuine. Many were earlier finance companies with no software business. They just changed their name to push up the market prices,'' merchant bankers said."We have a fairly overweight position in technology," said the chief executive of a mutual fund, adding, "We have about 30 per cent of all our equity assets in this particular sector."Infotech promoters are also hiding their past track records while floating new IPOs. ICICI Ltd has written to the SEBI saying that Zenith Infotech Ltd - which is coming out with an IPO - has failed to inform prospective investors about apending litigation on its group company Zenith Magnetics Ltd for loan defaults amounting to Rs 8.05 crore. However, Zenith has disputed the claim in a public notice.ICICI had said in the letter that it invoked the personal guarantee given by Raj Saraf and GK Saraf (as promoters of Zenith Magnetics) against the above loan on January 10, 1986. As per the SEBI norms, a company which is coming out with an IPO should inform the prospective investors details about any pending enquiry and loan defaults of even sister companies in the same group.Sebi warningMumbai: Sebi has advised the stock exchanges to be more alert and use the stock watch system in a more proactive manner to identify cases of manipulation. "We have asked the exchanges to keep a close watch on scrips where the price variation is abnormal and is not supported by fundamentals," SEBI chairman D R Mehta said. "Our only concern is to ensure the safety of the market," he said.
