The rationale behind the relaxation is to encourage large infotech companies to list in the country instead of forcing them to seek a listing on international exchanges like Nasdaq. Thesedecisions were taken by the Sebi board here on Tuesday based on the recommendations of its primary market advisory committee.

The committee had recommended last month that the 25 per cent public offer condition should be relaxed for infotech, telecom and media companies.

While telecom companies are governed by similar norms which have already been relaxed for infrastructure issues, Sebi has, for the time being, decided to leave media companies out.

The capital market has witnessed a spate of new issues from infotech companies over the last few months. Most of these issues are from small companies. Most of them have charged a high premium from investors, given the public's thirst for such issues. The Polaris Software Lab issue, which closed on August 10, clocked an oversubscription of 20 times collecting as much as Rs 1,800 crore.

INSIGHT
Regulator's move lacks foresight

The Sebi board decision, though a good one, is a little shortsighted. The stated aim of the relaxation of theminimum equity offer of 25 per cent is partly to prevent the flight of large Indian infotech companies to bourses abroad.

Hence, the fairly meaningless additional conditionalities such as a minimum float value of Rs 50 crore and at least two million shares. But this relaxation will not really prevent an exodus from happening. Instead, the relaxation could have been kept at just 10 per cent of the issue without the riders. Even smaller infotech companies need a listing as often their main mode of remuneration is through stock options. And the benefit of this relaxation could have been extended to all high tech companies and not just infotech companies.

Aaron Chaze