The Hindu Business Line : SEBI working on IPO rating

THE Securities and Exchange Board of India (SEBI) is working with credit rating agencies to introduce grading of initial public offerings, according to Mr M. Damodaran, Chairman, SEBI.

The aim is to enable more realistic pricing of shares and help investors make an informed decision. SEBI cannot make it mandatory but if investors respond better to a graded IPO it would prove an incentive for promoters to opt for rating, he said.

Addressing the Tamil Nadu Investors' Association here on Friday, he called for greater retail and domestic investor involvement in the equity market. It is only the domestic investor who can bring in greater stability to the stock market.

Though SEBI works to safeguard the interests of investors, it is unfortunate that it does not get the support from investor groups. We need to see them insist on better governance, greater transparency. Minority shareholder does not mean passive shareholders.

SEBI was working to bring to book promoters of vanishing companies that leave small investors in the lurch. But at least a few investors need to participate in the legal proceeding or else, the promoters get away on technicalities, he said.

The board is also working on bringing down transaction costs for the investors and is talking with depositories to ensure free transfer of accounts between NSDL and CDSL. This would also help investors choose a better service provider, he said.

It is also talking to exchanges to introduce compulsory delisting of shares of companies that have not been trading or are in default. This would help ensure that investors do not get taken in by `penny stocks.' But here, it is the investor who has to be cautious and not let greed drive investment, he said.

For follow-on offering also SEBI is working on reducing transaction time and simplifying procedures so that companies will make shares available to the domestic investor rather than opt for the GDR or ADR market.

It is also addressing issues in mutual funds, the `best entry level vehicle' for the investor. It is working with them to reform fee structures and prevent distributor malpractice. SEBI is not yet regulating distributors but is looking at ways to do it, he said.

SEBI is working to getting more stocks into the market. Ultimately it is demand and supply that is at work and markets go up because there are not enough stocks to meet demand.

"Investors need to understand that regulation of the Indian capital market is always a work in progress."

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