SEBI proposes fast track issuance of securities

The Securities and Exchange Board of India has announced its intention to allow fast track issuance of securities under certain conditions. It is nice to see SEBI doing something constructive to make the primary market smoother and more efficient.

A spate of investor complaints after the IPOs of 1995-96 led to a regulatory clampdown that has had a chilling effect on the primary market. In 1995-96, the capital raised through the primary market was more than 6.5% of gross domestic capital formation. Despite a revival in the primary market in 2005-06 and 2006-07, the capital raised in these years is less than 2.5% of gross domestic capital formation.

The regulatory clampdown has also led to the partial exporting of our primary market. In 2006-07, the capital raised in the foreign (ADR/GDR) market was about half of that raised in the domestic primary market. In 1995-96, the corresponding figure was only 11% and until 1996-97, this figure had never crossed 25%.

A lot needs to be done to make the primary market vibrant once again. The fast track issuance scheme addresses some of the needs of well established companies trying to do a follow-on issue. The needs of the IPO market also need to be addressed in course of time.

Posted at 7:57 pm IST on Sun, 26 Aug 2007         permanent link

Categories: equity markets, regulation

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