The Association of Merchant Bankers of India (Ambi) is likely to suggest to Sebi to mandate disclosure of one-year track record of past issues in equity IPO application forms. The board of Ambi which will meet later this month will also recommend benchmarking of stock performance of previous issues to relevant sectoral or broader market indices.
?The stock price could trade lower due to adverse market conditions despite the company fundamentals remaining strong. So we will recommend benchmarking the performance of the stock price to relevant broader market indices,? said a person who was part of the initial discussions at the Ambi board.
Recently, the regulator had felt the need to disclose past track record of merchant bankers in initial share sale or IPO documents to enable retail investors to take well informed investment decisions. For benchmarking purposes, the Ambi board is considering clubbing IPOs based on issue sizes.
For instance, an IPO of R500 crore or above could be considered as a large-cap issue, which in turn could be benchmarked against Nifty CNX 100 index or BSE 200 index.
Similarly, an IPO with an issues size below R500 crore and R100 crore can be considered as mid-cap and small-cap issue respectively to be bench-marked against relevant indices .
Further, the Ambi board is expected to deliberate upon the recent Sebi decision requiring merchant bankers to maintain records of due diligence exercised in pre-issue as well as post issue activities.
The bankers are planning to approach Sebi seeking clarity on what constitutes due diligence. Currently there are no common set of rules with regards to due diligence and merchant bankers follow different standards of compliance.
A merchant banker said, ?without prescribing the basic parameters that constitutes due diligence, it will be the merchant bankers who will be at risk even for mistakes that had been committed by the company officials or its auditor.? He added: ?if a manufacturing company gives details about its fixed assets, duly certified by its auditor, will a merchant banker be required to individually inspect each site to verify the accuracy of information or can it rely on the auditors statement??
