Sebi plans to tighten book-building norms

Sebi chairman D R Mehta said that discretionary allotments to retail investors in a book built issue have been done away with and it has been decided to follow a system of proportionate allotments. There were complaints that some of the companies which raised money through the book-building route allotted the shares to their clients and friends, leaving common investors in the lurch.

The changed norms are inline with the practices followed in the more advanced markets of the west, where book runners, their associates and anyone even remotely connected with the book building process in any way are barred from the bidding for the issue. Mehta said banks, FIs and MFs would be exempted from this as they are major players in the primary market in India and barring them at this juncture would upset the market. What this means is that if SBI Caps is the book runner to a public issue, SBI – which can be described as its associate – would not be barred from the bidding. The norms on book building were formulated around three years back, but it is only now that the various items in it are coming up for question and becoming issues, Mehta said.

SMALL INVESTORS UNHAPPY: Meanwhile, small investors are still unhappy about the lesser role for them in the book-building route. In the case of the IPO of a software firm, 90 per cent of the IPO was through book-building. Of this, only 15 per cent was reserved for smallinvestors. Put simply, in book-building IPO, only one-fifth of the issue was available to small investors.

Cos to raise Rs 10,000 cr this fiscal
MUMBAI: After the debacle in the 1994-96 period, the primary (new issue) market seems to be on the comeback trail once again. Aggregate funds raised by the country’s primary market are likely to surge to Rs 10,000 crore ($22.94 million) in the year to March 31, 2000 from Rs 4,000 crore last year. With a slew of high value new issues being lined up for offer, about Rs 6,000 crore has already been raised and another Rs 4,000 crore should come over the next two months compared to Rs 4,000 crore in the whole of last year. SEBI estimates that the mutual funds sector would end up with around Rs 50,000 crore of inflows (gross) during the current fiscal. “MF collections had gone up partly in response to the tax breaks given to the sector and expressed the hope that the tax incentives would not be withdrawn in the next budget,” D R Mehta said.