The government is planning to introduce norms for private placement of shares to ensure transparency in a largely unregulated market.
The norms will include better disclosure standards that will ensure that the market continues to attract investors, but at the same time prevent any major scam. Finance ministry officials said they were considering the issue seriously because the market size has increased enormously, estimated at over Rs 70,000 crore in the last fiscal. Compared to this, the public issue market did business of only about Rs 100 crore in the same period.
While the ministry has received a proposal from the Over The Counter Exchange of India (OTCEI) to regulate the market, the officials said that did not seem feasible because the private placement market is by definition beyond such regulatory framework. They said that the market has expanded because of genuine reasons and any move to influence the market functioning should not kill it. They added the current public issue regulations are indeed time-consuming with the process involving vetting the prospectus and a mandatory two-month wait. These, sources said, often encourage companies to tap the private placement route.
The ministry is therefore in favour of making the process of offer in the private placement market more transparent by ensuring that the promoters come out with the important details relating to the company, including risk factors, at the time of inviting the public to invest. While terming the decision to buy and sell shares in such a placement as
