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Tuesday, Jan 22, 2002

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SEBI panel moots early IPOs by MNCs, banks

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MUMBAI, Jan. 21

IN a bid to revive the sagging primary markets, a Securities and Exchange Board of India (SEBI) panel has suggested ensuring multinational companies and banks that are required to dilute their equity, to do so now.

The SEBI panel on primary markets, which met here today, also suggested allowing companies to make simultaneous offering in India and abroad.

The committee under the chairmanship of Mr M.S. Verma, Chairman, Telecom Regulatory Authority of India (TRAI), also said that the many multinational companies that were given permission to start operations in India on the condition that after a few years they would make a portion of their equity available for the public had not done so. The committee therefore, recommended that the matter should be taken up with the authorities to ensure that the conditions were honoured.

Similarly, many banks are required to increase the capital under the norms for capital adequacy. Some had even planned to come out with public issues, but for various reasons have put off these plans. The committee felt that the Reserve Bank of India should be requested to advise the banks to make these public issues.

The committee was of the opinion that there was a need to impose higher disclosure in the case of mergers and de-mergers, which have major implications in valuations. SEBI might also examine stipulating disclosure norms in the explanatory statements in the notices to general body meetings.

The committee also recommended allotment of shares within seven days from the closure of the issue as against the current 15 days. This would enable listing within 14 days from the issue closure date and provide speedier exit route to investors.

It was also suggested to set up a common listing committee with representatives from Bombay Stock Exchange, National Stock Exchange and other exchanges for all exchanges in order to bring uniformity in standard and approach to listing.

In the case of restricted public offerings by listed companies, SEBI might examine the issue of limited disclosure requirements where the offering is for institutional buyers only. The committee has suggested stipulating norms and sales code for distributors of primary issues.

The committee noted that for the financial year ended March 31, 2002, companies were required to consolidate their accounts as per the Indian Accounting Standards and disclose the same under the listing agreement. The financials on a consolidated and stand-alone basis of the issuer company should be considered for determining eligibility norms for public issues.

During the period April 1, 2001- December 31, 2001, Rs 3,777 crore had been raised but with the next few anticipated offerings, the amount raised may be about Rs 6,000 crore in the current year, which would be similar to the amounts raised last year.

The committee felt that there was a need to rationalise the placing of advertisements to reduce the cost of public issues. The panel also suggested allowing payment through electronic transfer of funds in the case of public issues.

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