CALCUTTA/MUMBAI, MAY 8: Market regulator the Securities and Exchange Board of India (Sebi) will soon issue a circular making it mandatory for companies tapping the capital market to disclose end-use of funds every quarter, according to Sebi chairman DR Mehta."Previously, it used to be on annual basis. From now on, they would have to disclose it on a quarterly basis," Mehta said. Earlier, at a meet sponsored by the Indian Chamber of Commerce, Mehta said the Reserve Bank of India and the government have agreed informally to allow foreign venture capital funds to operate in India.Concerned over the quality of large number of IPOs (initial public offerings) hitting the market in recent times, Sebi has decided to undertake a review of the capital markets scenario in the country. As an initial step Sebi has called a meeting of the southern stock exchanges on Tuesday in order to get a feedback and assess whether there was any need to tighten the listing regulations and apply more stringency in vetting public issue prospectuses.The meeting will also discuss the extent of disclosure in the prospectus and whether more strict disclosure requirements should be imposed on the companies in the interests of investor protection. The feedback received from the exchanges will be used by the Sebi to initiate major policy changes in its IPO norms and listing requirements.As many as 18 ICE (infotech, communication and entertainment) companies listed on stock exchange during the past one year have shed upto 85 per cent of their stock values. Importantly, five software companies are now trading below their offer prices and six are trading close to their IPO prices. SQL Star International, Integrated Hitech, Kale Consultants, Visesh Infosystems, Melstar Information and Pentagon Global are also trading close to their offer prices.Around 23 IT and media companies have been listed on the BSE and other stock exchanges during the past one year and almost every stock has fallen by more than 42 per cent from its peak level since listing. This is certainly no good news for primary market investors. In fact, several software and media companies who have plans to tap the market are already started postponing their issues, according to market sources. Merchant bankers are also advising these companies not to go ahead with their IPO plans. As many as 100 companies were earlier planning to raise Rs 5,000 crore from the market.Mehta noted that the foreign funds should be allowed to operate like the foreign financial institutions once they are registered with Sebi and can be treated for pass-through. According to the Sebi chairman, the RBI and the government have informally agreed on the proposals although the official confirmation is yet to be conveyed.The VCF industry has been pressing the government for restoration of pass-through status for the funds which will exempt them from the tax on distributed or undistributed income that was levied in this year's budget. It had been expecting a rollback, but Union finance minister Yashwant Sinha did not do so when the budget was finally passed on May 3.The KB Chandreshekar committee constituted by Sebi had suggested that VCFs that have a dedicated pool of capital similar to that of mutual funds, operate in fiscal neutrality and should be treated as pass-through vehicles.Once registered with Sebi, mutual funds are allowed tax exemption at the pool level, which is similar to the capital pool of investors of VCFs.Mehta pointed out that a sizeable portion of the trading will be over the internet by the end of this year and felt that 97 to 98 per cent of the trading will be in demat form. He noted that there is a possibility that all the 1300 scrips on the BSE and NSE will have to be compulsorily traded in demat form by the end of this year.In fact, at today's morning session, BSE president Anand Rathi in his vision statement said that online trading was valued at $415 billion in 1999 and is expected to touch $3 trillion by 2003 worldwide.Mehta maintained that with corporate governance norms made compulsory especially compliance of accounting standards on segment reporting and deferred tax liability. According to him, Sebi, like all other regulators worldwide, is facing a problem in valuation of dotcom companies and new economy stocks. Malegam Committee and the Institute of Chartered Accountants of India have been given the responsibility of evolving a method of valuation for the new economy stocks.