Of course, not many investors may remember that ITL's `devolved' public offer at Rs 95 a share was allegedly the handiwork of a certain merchant banking outfit, which now masquerades itself as the last stop for all IT ventures' market bliss. The outfit was accused then, in very knowledgeable circles, of deliberately underplaying the ITL-offer marketing efforts to facilitate its acquisition of a substantial stake in the company through the underwriting route.

Times as well as investor perceptions have changed in the interregnum, but the dubious methods of savvy `market operators' have not. The cornering of shares by them continues unabated. The current fashion is to tap thebulk application route and withhold the allotment details from public scrutiny, while being on the right side of disclosure requirements. And, the regulators, on their part, lack the vision to stop the unscrupulous lot in their track. As per the present norms, the basis of allotment (BoA) is finalised by the issuer company in consultation with its regional stock exchange. Though it is mandatory to publish the BoA in the press, there is no uniform format prescribed for the same.

In recent months, some merchant bankers have exploited the situation ingeniously. They dutifully provide but the less sensitive data as part of the BoA. Information that will throw light on a few individuals receiving the most favourable treatment in a public allotment on a selective basis gets suppressed so brazenly. Discretion, endowed perhaps to help a fair public distribution, has come to aid largely discrimination!

Present Sebi guidelines on allotment permit 50 per cent of the issue to be mandatorily allotted to individualinvestors applying for 1,000 shares or less. The balance could be allotted among large applicants. Though well meaning, this second half of the prescription has unwittingly come to be misused. Indeed, 7 out of the 8 IPOs have logged oversubscription just from large investors alone. More importantly, subscription from large investors overwhelmed that from their smaller counterparts in 6 out of 8 issues. For instance, in KPIT Systems, there were 7 large applications -- each one, with a financial commitment of Rs 11.61 crore, vying to corner the entire public offer of 12.9 lakh shares to itself! Similarly, in SQL Star International, there were at least 7 major applications at the top end for 115 lakh shares, or almost four and half times the offer size!

Who are these bulk applicants? Market grapevine has it that lead managers of IPOs, or their associates, have often doubled up as large applicants in such issues to make the most of their underwriting obligations. They have pocketed sure underwriting commissionsand also the capital appreciation from bulk allotments. However, come to think of it, given the newfound craze for IT stocks, most of these IPOs did not warrant any underwriting. At the end of it, in the once-again-booming primary market - actually booming IT primary market - on the one hand, we have a universe of retail investors with a low average holding in the issuer companies. On the other, we have the large investors who, in effect, control a major portion of the floating stock of such entities. Consequently, we find that most often, the latter category of large investors are the price makers, while the smaller ones are the price takers. The overwhelming capacity of the large investors to subvert any free and fair play in the market is very clear. Yet, very little is disclosed about them.

Almost all the issuers have failed to provide any details on the `bulkers' as part of published BoA. What's more, one of them, the much-touted Polaris, has tried to be one up. Its recently published BoA contained awhole lot of details, but mostly inconsequential allotment data. Polaris, which went on to give elaborate allotment pattern for small corporate applicants, clubbed the large applicants under the omnibus classification, "1,100 shares & above". Significantly, the latter having unknown numbers constituted 99.4 per cent of the total shares applied in the bulk investors' category!

Obviously, if space had been the constraint, the company could have easily categorised its large investors at least into a limited number of groups and shown the lead in furnishing some concealed vital information on large investors. Transparency and corporate-governance would have gained currency.

It is indeed ironical that Sebi and the stock exchanges, which aspire to become investor-oriented, should gloss over this systematic non-provision of material information by the issuers. If the non-existence of a standard format is the lacuna, it ought to be easily rectifiable by the regulatory authorities. Another disturbing feature ofsome recent IPOs is the dual role played by certain intermediary organisations promoted by financial institutions. The most recent example of this phenomenon was the IPO of SQL Star International, where I-Sec managed the issue and decided the issue price which benefited ICICI, a major share holder in the company through its venture funds! The resultant conflict of interest did not bother Sebi one bit.

Though exasperating to reiterate, it's time that regulators assume a proactive role in investor protection measures rather than simply being reactive. Otherwise, they would eternally continue to chase the shadows of unscrupulous market intermediaries.

[E-mail feedback to: investar@bol.net.in]

(Arranged by INVESTAR - The Aarthik News & Research Syndicate)