Just one major IPO took place in 2013. Instead of working on reviving investor confidence and protecting them, SEBI plans to reduce disclosure—in a disclosure-based regime—to boost IPO interest.
I f Morgan Stanley’s exit reflects disenchantment with the mutual fund industry, then resource mobilisation through initial public offerings (IPOs) is in even worse shape. In the entire 2013 just one IPO caused a flutter among investors—of Just Dial. The other two worth a mention were VMart and Repco Home, while Power Grid picked up a massive Rs6,958 crore through a follow on offer. While, 35 IPOs from the small and medium enterprises (SME) mobilised around Rs367 crore, the IPO market is as much in the doldrums, as it was after the IPO mania of 1992-96 saw thousands of fly-by-night operators vanish with investors’ money. The difference between the situation 20 years ago and now is that policy-makers neither understand investor disenchantment nor do they care.
Consider the experiment with the SME sector. On the one hand, 35 public offerings based on a different set of rules (no filing of prospectus, but market-making mandatory and minimum application of Rs1 lakh) seem like good performance. But aggregator sites report that only 20 out of 45 stocks listed on the two national bourses are traded and that, too, with low volumes. But, instead of working on reviving investor confidence, the Securities and Exchange Board of India (SEBI) plans to relax entry barriers by scrapping IPO grading, reducing disclosures and doing away with even the formality of making a public offer. This is after the experiment with offering a safety net to investors had also failed (in fact, two issues offering a safety net had to pull out of the market). However, market observers believe this will only lead to SME listings being the newest way to launder money by hawala operators.
Inside story of the National Stock Exchange’s amazing success, leading to hubris, regulatory capture and algo scam
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