To expedite clearance of initial public offer (IPO) applications, Securities and Exchange Board of India (Sebi) is considering to put in place a time frame within which companies will have to respond to queries by the market regulator.
“We are going to make it obligatory that response to Sebi's queries has to be given in a particular time-frame and if it is not given, the case will be closed,” Sebi Chairman U K Sinha said at a CII event here.
Defying the criticism that Sebi takes a longer time to clear IPO applications, Sinha said, “We also found that if the market is not good, if you want to delay the thing, you don't respond to Sebi's queries. We are going to change the rules of the game.”
Merchant bankers, he further said, would have to do the due diligence in time.
According to the norms, a company has to come out with its public issue within 90 days of its prospectus being approved by Sebi. If it fails, the approval lapses and the company has to restart the entire process.
Sebi is also going for a complete overhaul of the primary market norms and a review of the entire IPO process ,for which it has set up a group.
More From This Section
“Our idea is to make fund raising by corporates in India more efficient both by way of time and by way of costs. But let me also alert you that in the process there will be some additional obligations on the intermediaries,” he said.
To help investors make informed judgement, Sebi has already asked merchant bankers (issue managers) to reduce the size of the application form for IPOs and disclose their track record of the issues managed and their performance.
“We are thinking of what kind of penalty can be imposed if there are any irregularities. We are looking at the volatility at the first day of trading, we are seriously working on that,” he added.
Pointing out that the IPO process is "very old", Sinha said, "we are going to have a complete review of the process. We have set up a group. Our idea is to make fund raising by corporates in India more efficient both by way of time and by way of costs."
He further said there would be more obligations on intermediaries and they should be ready for them.
Sebi chief further said that the regulator would come out with more regulations within a month or two and one of them would be on alternative investments.
As regards the criticism over some of its draft regulations, Sinah said, “We have clarified that if someone is raising money outside and investing here, we will not look at that so far as venture capital and private equity is concerned. But if you are raising money here, then customer protection is a very important element.”
On concerns of surveillance activities of Sebi, he said, the whole issue needs to be taken in the right spirit and not as a threat.
“Sebi has been able to substantially enhance its surveillance capacities and we are getting alerts which are not very comforting,” he said, adding that the efforts would have to be made to strengthen the system.
Sinha further said there was a need to focus on compliance culture. “The compliance culture needs to be strengthened in a big way. The focus of the senior management on the culture is perhaps lacking,” he added.
On bulk of the complaints getting resolved in favour of market intermediaries and not investors, Sinha said, “I don't know if it is by a scheme. Either the exchange redressal mechanism is working fairly or there is a need to have a look at the grievance mechanism as it is.”
Sebi, he admitted has been receiving inputs that a disproportionate number of complaints made before the stock markets are being decided in favour of intermediaries and not the investors.
“We have received inputs from high networth individuals (HNIs) capable of investing millions of rupees but they feel frustrated. A single disgruntled investor can affect the business of may be 20, 100 people", he added.
On appointment of an international consultant, Sinha said, “We are the first regulator in the country to have decided to appoint an international consultant to look at our entire organisational structure. We are going to engage an international consultant to get into entire area of working."