The Hindu Business Line : Registrar in the dock

THE ONGC SHARE allotment confusion has brought under critical scrutiny the role of registrars in a public issue of shares. Specifically, it is alleged that the registrar in question, while finalising the allotment of the ONGC's mega issue of Rs 10,500 crore, did not follow the allotment formula and credited more shares to high net worth individuals than was warranted. Many such allottees, in turn, sold the shares, some of which at least they were not entitled to. The resultant post-issue mess, involving the issuer, the stock exchanges, the investors and the Securities and Exchange Board of India, besides the registrar,has taken the sheen off what has been a highly successful season for the government-issuer. Until this confusion, the Government could not only claim credit for successfully offloading its stake in seven public sector units in the space of a month, of March, but also for meeting divestment targets and ensuring a reasonable deal for the smaller investor. It is now certain that howsoever the issue of "over allotment" is resolved, a section of the capital market will feel aggrieved.

Ironically, in early March the Government had faulted another category of capital market intermediaries, the merchant bankers, for the low initial subscription for IBP. In the end all the share issues sailed through and attention shifted to the post-issue formalities and the agencies responsible for them. No one foresaw the likely pitfalls in the post-issue procedures that had to be completed in double-quick time after the closure of the subscription list, even when a large number of applications were expected under various categories given the intrinsic strength of the issues. The registrar has to collect application, liaise with the bankers to the issue and the stock exchanges, enter the data, implement the allotment procedure, including despatch of refunds. . Hardly glamorous, compared to an issue manager's role, but central to a public issue's success. As the Government's present predicament indicates, it is totally unwise to take the registrar's role for granted.

In the final analysis, the failure of any one intermediary can bring disrepute to the entire process. In the wake of the ONGC fiasco, it is worth pondering whether the selection of the registrar was made objectively taking into account the constraints of a tight schedule. Post-issue work as a rule is more labour intensive and technology by itself has not been a panacea. Besides, registrars, like any other capital market intermediary, have had to scale up their level of operations and infuse larger capital just to stay afloat. With the public issues market having remained virtually dormant till this year, many intermediaries, including the registrars, had gone out of business. One reason for the present post-issue fiasco can be traced to a lack of choice among registrars.

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