Panel rejects grace time on IPOs for MNCs

new delhi: concerned over multinational companies postponing their public offer and delisting from stock exchanges, the parliamentary standing committee on finance has asked the government not to concede their request for extension of time for public issue. the committee, headed by janardhana reddy, said companies in respect of which the stipulated time for offering a part of their equity to the public, is about to be over, have not come out with a public issue, instead they approached the government for removal of the condition by citing inter-alia the continuous losses suffered by them. "the government should not concede their request for removal of such a clause or extension of time for complying with the stipulation on any grounds, thereby ensuring that these companies tap the markets within the prescribed period," the committee, in its 27the report, said. mncs — hindustan coca cola holdings and shell india — had approached for deletion/waiver of disinvestment condition, it said. asking the government to come out with a clear policy, the committee said it was distressed to note that several mncs have started delisting from stock exchanges and would erode investors'' confidence. the other companies that are yet to make ipos include pepsico india, wamco petrogas, elf gas india, total petroleum, arco global energy venture, bg plc and shc energy india, the committee noted. according to the department of industrial policy and promotion, 21 companies had been permitted by fipb to bring in fdi with the stipulation that they would make public offer, the committee was informed by the ministry of finance. on a query whether all mncs had complied with the stipulation, the finance ministry informed the committee that according to sebi, "no mnc had come out with an ipo during the last five years." sector specific guidelines for foreign direct investment laid down that fdi would be allowed in certain sectors subject to the condition that such companies would divest 26 per cent of their equity in favour of the indian public in five years, if these companies were listed in other parts of the world. the sectors include telecom, covered internet service providers not providing gateways (both for satellite and submarine cable), infrastructure providers of dark fibre, e-mail and voice mail and e-commerce, the finance ministry informed the committee. guidlienes for consideration of fdi proposals by the foreign investment promotion board route include a clause that in special cases where the foreign investor was unable initially to identify an indian joint venture partner, the board may consider and recommend proposals permitting 100 per cent foreign equity on a temporary basis. it would be on a condition that the foreign investor would divest to the indian parties (either individual joint venture partners of general public or both) at least 26 per cent of its equity with 3-5 years.