Sebi chief blames industy for slump in primary market

Our Corporate Bureau

New Delhi, Dec 3: Securities & Exchange Board of India chairman DR Mehta on Monday strongly defended his step-by-step approach to implementation of market reforms and put the blame on corporate sector for the current state of the primary market.

On the positive side, the Sebi chairman said Rs 10,000 crore is expected to be raised during the current fiscal through equity and debt instruments against Rs 6,100 crore in the previous year. In addition to this, mutual funds have already raised net amount of Rs 10,000 crore in the current fiscal so far against Rs 9,100 crore raised in 2000-01.

Stating that Sebi was the favourite whipping horse of corporates and investors every time the stock market goes down, Mr Mehta said, “Sebi received only seven investor complaints when the market was booming before March this year but has got over one lakh complaints in 8 months since themarket crashed. Investors should know that investment in equity instruments carries risk with it.”

He said industry associations and corporates should “introspect” on the reasons behind the low mobilisation of funds from the primary market. “The market is based on confidence of investors. If corporates don’t behave and if money is not being raised from the market, then companies and industry bodies should find solution instead of blaming Sebi or anyone else,” the usually soft-spoken Mr Mehta said with a tinge of anger in his voice.

He cited the example of an industrialist and a former top functionary of an industry body who blamed Sebi for killing the capital market but the share price of his own company is today languishing at Rs 4 against the public offer price of Rs 40 per share.

Mr Mehta said Sebi’s step-by-step and systematic approach to introducing reforms like dematerialisation of shares, rolling settlement and derivative trading has been successful. “You can’t do such things in one ago,” he quipped.

Mr Mehta said introduction of rolling settlement is not the answer to all problems plaguing the stock market. “In cases Amar Raja Batteries, Global Trust Bank, Lupin Labs and Cyberspace, all these shares were in rolling mode and still the price was rigged,” said Mr Mehta.

Mr Mehta said the upward and downward movement of share prices is not Sebi’s concern. “Our concern is manipulation. But Sebi is not some guarantee corporation which can assure investors of returns on investment in stock market.”

Mr Mehta said Sebi cannot work as an effective and efficient regulator due to lack of powers which prevent it from taking strong action against offenders. “Worldover, in countries like USA, UK and Australia, regulators have much more powers than Sebi. There is ‘overlap and underlap’ of power and control in India.” Mr Mehta said Sebi should be given more powers while putting an end to the multiplicity of powers which provide an opportunity to unscrupulous companies, promoters and operators to exploit the market.

He also criticised personal attacks on top officials of regulators. Mr Mehta has been under fire from some quarters for allegedly forming a ‘Jodhpur Club’.