Sebi’s plan to ask merchant bankers to monitor the end-use of IPO money makes me wonder whether the board has run out of ideas for reviving the dormant primary market. Thrusting meaningless responsibilities on merchant bankers or asking them to monitor the IPO proceeds will not help. We need to bring back the concept of asking merchant bankers to underwrite the issue. If they are convinced, if the issue is good enough for them to underwrite, then the issue is good for investors. We should scrap the concept of book building and bring back the fixed price issue and give time to retail investors to respond. Though it is very easy to copy western practices, we must realise that the Indian market has its own nuances and a wholesale transformation of an institutional-driven framework will not work. Unfortunately, though we expect individual investors to channel their investments through Mutual Funds and with the 40-odd asset management companies (AMCs), their performance is nothing to write home about. Moreover, brokers, who are playing a great role in mobilising funds for new fund offer (NFO), were also driven out in the name of eliminating front and commissions without any alternative distribution mechanism. Let the regulators understand that a share is a product and it needs distribution and that was sensibly being done by brokers. So if brokers are not brought back into the distribution, no amount of responsibility on merchant bankers will help.
R Sankaran, Mumbai
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