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Journalism of Courage
Sebi is appropriately diligent about correcting media reports and posting clarifications on its website. Since these reports usually come from disgruntled market intermediaries, Sebi8217;s clarifications are often aggressive. For instance, last week, it hit out at a leading newspaper8217;s allegation that companies are suffering due to delay in processing their IPOs by releasing stunning data on why a score of IPOs were delayed. Consider this: the IPO of rating agency ICRA which rates other IPOs has not been cleared because the company is not clear who its promoters are. Power Finance Corporation had failed to appoint independent directors while submitting its offer document. Strangely, although PFC made the appointments and got a go-ahead, it failed to make its issue during the three months when Sebi8217;s observations were valid. LT Overseas and Hanung Toys 038; Textiles were delayed because Sebi was discussing what must be the policy on pre-IPO placement to Bennett Coleman 038; Co. The issue has since got a go-ahead, but Sebi8217;s policy in this regard is unclear. KEW Industries was delayed for about eight months as it had no business commencement certificate. The 20 per cent promoter contribution was also not, in fact, from the promoters.
Shoddy documentation
Reluctant bourses
The Sebi clarification indicates the two stock exchanges are reluctant to clear certain issues. The prospectus of Blue Bird India managed by DSP Merrill Lynch was delayed for want of in-principle listing approval by the bourses. The same is true for Jas Toll Road Company, Celestial Labs and Synergies Castings handled by Imperial. If bourses are reluctant to list issues, investors need to know what worries them; sadly, Sebi8217;s clarification gives no answers. Yogindera Worsted is an astonishing case. It filed its prospectus in July 2006. Sebi says it had planned a rights issue in 2005, which was withdrawn when the regulator confronted it with suspected price manipulation of its shares. One of the promoters is also a defaulter to PSIDC, but has since entered into a revised settlement scheme. Sebi hasn8217;t cleared the issue as it suspects the proceeds will be used to pay back past obligations to the institution. Clearly, this is a repeat of 1992-94 and Sebi needs to bring it to the notice of the finance ministry and the RBI. Interestingly, the bourses cleared this issue. Did Sebi ask them why it was cleared?
IPO rating benefits
Minar International, one of the few IPOs to be rated, got a 2 out of 5 rating. Interestingly, this issue failed as it did not get institutional subscription. This suggests IPO ratings are a big deterrent to otherwise indiscriminate institutional investment, as they would have to explain investments in poorly rated issues. Sebi says even top investment banks can8217;t get the prospectus right. Malwa Industries, handled by DSP Merrill Lynch, Kotak Mahindra Capital and Yes Bank, was delayed due to corporate governance issues and lack of clarity on cross-holdings within group entities. Sobha Developers, by Kotak Mahindra, Enam and IL038;FS, sought exemption from disclosing its land bank. Info Edge, handled by ICICI Securities and Citi Group, was delayed from May to September as the object of the issue and fund requirements weren8217;t properly spelt out. Sebi8217;s exposure of the primary market is welcome, but why is there no explanation in just two cases 8212; Global Vectra Helicorp and Ruchira Papers?
