Even as BOC India, the industrial gases major, prepares to approach the Securities and Exchange Board of India (Sebi) for its proposed Rs 140-crore rights issue of shares, the markets watchdog is set to insist on adequate disclosures in the offer document. This is because J N Sapru, the former ITC chairman who was one of those hauled up by the Enforcement Directorate for ITC's alleged Fera violations, is also chairman of BOC India.
According to sources, the offer document is expected to be filed by BOC with Sebi any day now. The company is offering rights in the ratio of four rights shares for every five shares held. An extraordinary general meeting of BOC last week cleared the rights issue proposal. Highly placed Sebi officials said the regulator was unlikely to relent in BOC's case and would want the disclosure on Sapru to be in the offer document. "We cannot relent unless there is a change in Sebi's policy'', a Securities and Exchange Board of India official said.
It may be recalled that the market regulator had asked for a similar disclosure in the case of the rights issue of another city-based company, Bata India, where Sapru was a non-executive director. Sapru resigned from the board thereafter. "In Bata's case too, the same policy was followed'', an official explained.
In BOC's case, Sebi feels the issue is of greater significance, since Sapru is the chairman of the company. "In any case, even if the person no longer figures on the board, the disclosure stating that a former director was hauled up for alleged Fera violations is a must," the official pointed out.
In fact, the issue of such disclosures about people associated with companies seeking to tap the market has become a major point of discussion within Sebi itself, with top executive directors discussing the various aspects of such steps. Officials said the various issues which were being discussed informally between the executive directors were under which cases disclosures should be applicable. "Is it necessary to press for disclosures even if the person has been fined, say, Rs 1000?'' asked an official. "Or does conviction or prosecution mean disclosures have to be made? These are some of the issues before us'', an official said.
However, at this point there is no alternative before Sebi, since the policy on disclosures remains unaltered and is unlikely to be changed in a hurry. Sebi has anyway been getting tough on disclosures in new capital issues, and is set to insist on disclosures even for issue intermediaries associated with a particular flotation. For instance, if a merchant banker associated with a particular issue has been hauled up by Sebi, the markets watchdog is proposing to have even that disclosed in the prospectus of the issue.
