The recent withdrawal of two companies? public issues is a telling remark on IPO pricing strategies through the book-building route adopted by promoters. Pricing should be determined on the issuer?s past financial track record, and should not be on the basis of future perceptions/expectations. The case of Reliance Power is a perfect example of how things are being manipulated. Also, it is time to abolish ?face value? as a concept for mobilising equity funds. There is no rationale any longer for issuing shares at a face value of Rs 10 if the premium is so huge. Finally, the modus operandi of the allotment of shares, particularly through book-building, which is heavily loaded in favour of large investors and market speculators rather than small investors, does not reflect good corporate governance. This, despite the talk of policymakers to safeguard small investors. In some heavily oversubscribed issues, allotment to small investors is well below 25%.
?RS Raghavan, Bangalore
Corrigendum
In the front-page news story, ?HDFC, CBoP merger gets nod?, published in FE on February 24, the headline should have been ?HDFC Bank…? The error is regretted
Tax audit limit
The provision of compulsory tax audit in the case of a businessman having an annual turnover exceeding Rs 40 lakh and a professional having gross receipts over Rs 10 lakh was introduced in 1985. Since then, rising rates of inflation have eroded the value of money at a tremendous pace. Hence, as a part of realistic tax reform, it?s better if the Finance Minister were to increase the threshold of compulsory tax audit in the IT Act to at least Rs 1 crore for business income and Rs 25 lakh for professional income.
?RN Lakhotia, New Delhi
