IPO revamp to make it investor friendly
The government has told Sebi to review the IPO process and then rework it if warranted.
By Shaji Vikraman & Hema Ramakrishnan, TNN |
MUMBAI/NEW DELHI : The process of initial public offerings (IPOs) in the local primary markets is set to be revamped. The government has told capital market watchdog Sebi to review the IPO process and then rework it if warranted. Besides minimising manipulation, the aim is to ensure that the process is more efficient, simple and investor friendly.
The proposal to review the IPO process was discussed at the weekend meeting of the Sebi board, and the exercise is expected to be kicked off soon, an official who attended the meeting said. The FM is expected to make a statement on the proposed clean-up of the process shortly, officials said.
The review will also focus on the role of intermediaries, especially merchant bankers to the offering, besides addressing several other concerns raised after a Sebi probe in 2006 revealed several cases of manipulation in IPO allotments. The scam centred around a few operators, who used benami demat and bank accounts to corner shares reserved for retail investors.
After allotment, the shares were transferred to the financiers of such an operation, who sold it on the first day of listing to cash in on the gains. Thousands of fictitious applications were found to have been put in a spate of IPOs during the equity boom between '03 and '05 to cash in on gains when the shares were listed.
The finance ministry has suggested that the regulator should encourage electronic filing of applications in the primary market. The ministry is also in favour of a higher quota for mutual funds in IPOs considering that mutual funds are emerging as preferred equity investment vehicles for retail investors, officials said.
The proposal to review the IPO process was discussed at the weekend meeting of the Sebi board, and the exercise is expected to be kicked off soon, an official who attended the meeting said. The FM is expected to make a statement on the proposed clean-up of the process shortly, officials said.
The review will also focus on the role of intermediaries, especially merchant bankers to the offering, besides addressing several other concerns raised after a Sebi probe in 2006 revealed several cases of manipulation in IPO allotments. The scam centred around a few operators, who used benami demat and bank accounts to corner shares reserved for retail investors.
After allotment, the shares were transferred to the financiers of such an operation, who sold it on the first day of listing to cash in on the gains. Thousands of fictitious applications were found to have been put in a spate of IPOs during the equity boom between '03 and '05 to cash in on gains when the shares were listed.
The finance ministry has suggested that the regulator should encourage electronic filing of applications in the primary market. The ministry is also in favour of a higher quota for mutual funds in IPOs considering that mutual funds are emerging as preferred equity investment vehicles for retail investors, officials said.
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