Sebi is planning to scrap the compulsory IPO grading process for companies going public and change the relevant rules soon. The market regulator is also planning to allow more companies the leeway to file a shelve prospectus for raising funds from the market, U K Sinha, Sebi chief said.
"Our consultation is over. There is a unanimous view now that the IPO grading should not be made compulsory," Sinha said. "We are likely to consider this suggestion and may be we will change our rules in this regard," he said. The Sebi chief was speaking at a conference organized by the Association of Investment Bankers of India here on Tuesday.
The compulsory IPO grading process was started in mid-2007 and there is not much evidence to suggest that it has worked the way it was intended to. Price performance of stocks of companies going for IPOs after their listing did not always show any direct correlation to their ratings, which is received before filing a prospectus.
The Sebi chief also said that the regulator was looking at expanding the list of companies which can file shelve prospectus. "We are exploring very seriously the area of shelve prospectus since the Companies Act has provisions on questions of shelve prospectus. We want to expand the list of eligible companies who can issue shelve prospectus," Sinha said.
A shelve prospectus is like an umbrella prospectus that a company can file when it wants to tap the public market for money on a continuous basis. Under such provisions, the company can file a master prospectus once and can raise funds through the next one year by filing with the regulator information about any major change that has taken place in its finances, operations, etc, since the prospectus was filed. This is a cost-effective method for companies, which also helps save substantial time and effort on the part of the firm's management.
The Sebi chief also said that the regulator was looking at ways to facilitate fund-raising by small and medium enterprises (SME) by bringing such companies and merchant bankers where people from both sides can interact closely.
"Our consultation is over. There is a unanimous view now that the IPO grading should not be made compulsory," Sinha said. "We are likely to consider this suggestion and may be we will change our rules in this regard," he said. The Sebi chief was speaking at a conference organized by the Association of Investment Bankers of India here on Tuesday.
The compulsory IPO grading process was started in mid-2007 and there is not much evidence to suggest that it has worked the way it was intended to. Price performance of stocks of companies going for IPOs after their listing did not always show any direct correlation to their ratings, which is received before filing a prospectus.
The Sebi chief also said that the regulator was looking at expanding the list of companies which can file shelve prospectus. "We are exploring very seriously the area of shelve prospectus since the Companies Act has provisions on questions of shelve prospectus. We want to expand the list of eligible companies who can issue shelve prospectus," Sinha said.
A shelve prospectus is like an umbrella prospectus that a company can file when it wants to tap the public market for money on a continuous basis. Under such provisions, the company can file a master prospectus once and can raise funds through the next one year by filing with the regulator information about any major change that has taken place in its finances, operations, etc, since the prospectus was filed. This is a cost-effective method for companies, which also helps save substantial time and effort on the part of the firm's management.
The Sebi chief also said that the regulator was looking at ways to facilitate fund-raising by small and medium enterprises (SME) by bringing such companies and merchant bankers where people from both sides can interact closely.
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