The Hindu Business Line : ICAI offers service in IPO issues

THE Institute of Chartered Accountants of India (ICAI), worried at the latest incidents of wrongful allotments of initial public offerings, has proposed to offer its services in vetting the allotment process followed by companies.

The fact that the IPO pipeline is full and bursting has come as a boon for the Institute, which wants to play a role in certifying the systems followed by individual corporates.

Senior ICAI sources indicated that professional accountants may indeed have a task cut out for them in this context.

The idea is to ensure that the allotment process is completely transparent, a move that will address investors' concerns stemming from incidents concerning public issues by YES Bank and IDFC.

The intention assumes significance in view of the Finance Minister's reference to "systemic deficiency" and the fact that corrective steps are being put into place. The regulator incidentally has also assured that investors in the primary market need not worry about the forthcoming capital issues.

At this juncture, members of ICAI have no direct responsibility or mandate with regard to IPOs, felt Mr T.N. Manoharan, V-P of ICAI. "For the companies involved, compliance is a major issue. We will have to examine whether there is scope for accountants to be involved here", he told Business Line.

Compliance is actually a major area for IPO aspirants, accounting circles point out, adding that investors too have to exercise sufficient vigil on this front. Such vigil may take the shape of a simple advice to depository participants (DP) to accept shares that may be allotted to them pursuant to the issues.

As for the issuers, beneficiary accounts with DPs may be given credit to within specified days from the date of allotment, while refund orders may be sent in line with a stated arrangement.

Errant cos referred to regulators

ICAI has, from a randomly-selected sample of about 70 companies, over the past several months referred 5-8 entities to various regulators for shortcomings.

The Institute, which has randomly picked up and reviewed financial statements of companies, has identified a few clear cases of reporting inadequacies as well, Dr Ashok Haldia, Secretary of ICAI, said, adding that these cases have been referred to the Institute's disciplinary mechanism.

"This year we have increased the sample size", Dr Haldia noted, while emphasising on the importance of the task. The move has been taken to enhance transparency, he felt.

ICAI, which is currently strengthening its ties with the International Federation of Accountants, hopes to benefit from the initiatives taken by the global body in areas like ethics, education and assurance.