Talking to The Financial Express Bank of America managing director and head of investment banking division Sunil Gulati said: "While no investor would deny that profits are the paramount indicator about a company's financial health, there is a class of investors who are patient enough to let a company build its business to its full potential before it starts reaping profits. In other words, these investors are more interested in long term investment and want to see a clear path to a robust growing and sustainable profit stream than be concerned about the short term profits that could disappear at the slightest disturbance to the business model."

Investors in the Indian market are sophisticated enough to distinguish between a "low profit-but-promising venture" and a "low profit-and-no- future" venture and it should be left to the market to determine whether a company is able to raise equity financing, irrespective of its profitability track record, he added.

Association of Merchant Bankers of India (AMBI) earlier had written to its members in this regard to give their views which would be submitted to the Securities and Exchange Board of India (Sebi) and is waiting for the reply.

Sebi sources said: "Investors who are not sure of the return from investment in equities need not make an attempt to invest in equities rather they can invest in mutual funds or similar schemes offered by banks."

However, DSP Merrill Lynch investment banking division head and senior vice president Ravi Kapoor said, "Certain standard has to be maintained if the primary market has to be better off. Only companies with sound, well defined, sustainable and profitable business model should be allowed to tap the market."

Ind Global Financial Trust Ltd (IGFTL) chairman R Shankaran, who would spearhead the corporate financial activities of Arther Andersen as IGFTL has been merged with it, said: "Equity is a risk related investment and market is not the place to create watertight compartments so to say Sebi as regulator should give 100 per cent equity protection to investors. Public issues getting devolved or undersubscribed is a global phenomenon. So, it is the market that has to decide about the quality of issues not the regulator."

It will not be in the interest of the market to prevent a promoter from raising money because of the minuscule profit, if he has ideas and he wants money to convert those ideas into a reality. "How could entrepreneurs grow if they are not allowed to go the public when he has no other source for money," Mr Shankaran asked. There need not be any roadblock as long as a promoter meets IPO norms prescribed by Sebi, he added.