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Market regulator rules out easing of norms for new IT issues

Information technology companies, aspiring to cash in on the boom conditions in the market, are in for a disappointment as the Securities and Exchange Board of India, or SEBI, has ruled out any relaxation in norms governing initial public offerings, or IPOs, from the infotech, communications and entertainment, or ICE, sector.

"The question of any relaxation in IPO norms for dot-com companies does not arise," top SEBI sources said. The infotech, communications and entertainment firms, riding on extraordinary valuations in the marketplace, have been clamouring for easing of IPO norms.

As per SEBI guidelines, a firm can be eligible to come out with an IPO by meeting either of the following criteria:
Issuer should have a three-year profit-earning track record; or
Issuer's project should be appraised by a scheduled bank or financial institution having not less than 10 per cent stake in it. The norms are the same both for the new and the premium issues.

"Dotcom or otherwise, the issuer has to meet one of these criteria and they should forget about any possible relaxation whatever be the lobbying,'' the source said.

Notwithstanding the decision to reduce the minimum requirement for public offering to 10 per cent from 25 per cent of the post issue capital, the market regulator had recently tightened the guidelines for the infotech companies.

It had insisted that an issuer claiming to be an infotech firm should show profit on the balance sheet for the last three years only from this sector.

This guideline has plugged loophole in cases where many of the non-banking finance companies were changing their names to suggest infotech as their main line of business.

Recent IPOs from most of the ICE firms were oversubscribed many times over as investors were rushing to share the market gains.

UNI

Business