Sebi turns cautious on small issues

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Mumbai, Jan 11: Market regulator Securities and Exchange Board of India (Sebi) is adopting a cautious approach in giving the green signal to medium- and small-sized initial public offerings (IPOs). A total of 22 offer documents, each planning to raise anywhere between Rs 86 lakh to Rs 200 crore from the primary market in the beginning of 2005, await Sebi clearance.

A scrutiny of data compiled by primary market tracker Prime Database, shows that these companies, if given a go-ahead by Sebi, will raise a total amount of about Rs 1,000 crore.

Sebi is, however, in no hurry to clear these offer documents that have been filed with it in the last three months. A senior Sebi official told FE “All the offer documents are being examined carefully and many a time we have to send them back to the companies and their lead managers before we clear them. Companies with strong potential and good fundamentals only will be cleared.”

K Srinivas, head of investment banking, UTI Securities, however, feels that the market regulator is being over-cautious in its approach. He told FE “A small-sized issue does not necessarily mean that it is a bad issue, as the bigger ones have also disappointed the investors after getting listed at relatively higher premiums.”

“The market regulator has already laid down stringent disclosure norms in the offer documents after the experience of the ’90s. All the companies that have filed offer documents in the recent past have adhered to these norms and there is little scope left for loopholes,” Mr Srinivas added.

Of the 22 offer documents filed with Sebi, 15 issues awaiting Sebi clearance have issue sizes ranging from Rs 86 lakh to Rs 21 crore. The smallest among these is Capricorn Systems Global Solutions which will tap the market with an issue size of Rs 86 lakh.

In the private sector, there are issues like that of Emami which plans to tap the market with a Rs 200 crore issue. Others in the pipeline are Shopper’s Stop (with a target to raise Rs 150 crore), UTV Software Communication (Rs 150 crore), Amar Remedies (Rs 100 crore), Gateway Distriparks (Rs 45 crore) and SMS Pharmaceuticals (Rs 40.50 crore) are the other major issues that are awaiting Sebi approval.