Sebi board wants IPO disclosure norms review

Reliance Power's exemption demands prompt move.

The Securities and Exchange Board of India (Sebi) has proposed a comprehensive review of its Disclosure and Investor Protection (DIP) guidelines.

The suggestion for a complete review of the DIP guidelines came from the Sebi board, when its views were sought on exemptions needed by Reliance Power, at its meeting in Chennai last week, sources close to the developments said.

At present, the public issues are governed by guidelines, which do not have the same force of law as regulations. Once the DIP guidelines are converted into regulations, these would come under parliamentary scrutiny as any other rules and regulations.

After the DIP norms become regulations, Parliament will have the right to seek a review of the provisions if it is not convinced about any of them. Any amendments to the DIP guidelines are currently carried out through administrative decisions by executive authorities at Sebi. Reliance Power, a Anil Dhirubhai Ambani Group company, had applied to Sebi to exempt it from the requirement of having to arrange 75 per cent of the financing for the planned projects before the initial public offer and also to allow it to offer shares with a face value of Rs 2 even though they would be priced below Rs 500 per share.

The DIP guidelines, as they exist now, do not allow a company to offer shares with a face value of less than Rs 10 if the price per share is going to be below Rs 500. Reliance Power will be implementing two ultra mega power projects of 4,000 MW each "" one at Sasan in Madhya Pradesh and the other at Krishnapatnam in Andhra Pradesh.

While Reliance Power did not want to comment on the issue, sources said these exemptions have been sought on the grounds that the promoter group has various other listed companies and also has a credible track record of profitability and dividend payments.

While leaving the Reliance Power issue to the discretion of the Sebi management, the board felt that instead of granting exemptions on a case to case basis, the entire DIP guidelines should be taken up for a review taking into consideration the changing market conditions and the financial needs of crucial sectors like infrastructure.

The review would benefit all future IPOs and other such promoters, the Sebi board said.