Finance and Company Affairs Minister Jaswant Singh's strategy to give a fillip to the capital markets is likely to see the initial public offer norms for loss-making companies being relaxed further.
The Securities and Exchange Board of India is likely to allow loss-making companies to tap the primary market through the fixed price route.
At present, such companies are allowed to list themselves on the domestic bourses only through the book-building route.
According to a proposal being considered by the finance and company affairs ministry, high-growth companies in telecommunication and high-tech industries face problems in raising resources because they are barred from floating a public issue through the fixed-price option if they are making losses.
Such companies, because of the inherent nature of their businesses, are not profitable in the initial years.
Sunil Bharti's Bharti Tele-Ventures was the last loss-making company to float an IPO through the book-building route with a premium to the face value.
Even the book-building route has certain riders. According to Sebi guidelines for IPOs through this route, 60 per cent of the issue should be subscribed by qualified institutional buyers.
Otherwise, the entire amount has to be refunded and the issue has to be junked.
According to government officials, Sebi has also appointed a committee to take a fresh look at the IPO norms for companies in general, including loss-making ones.
They said the committee, which recently submitted its report to the capital market regulator, had specifically addressed the issue of IPO rules for loss-making firms.
Government sources also said the move was significant in the backdrop of attracting foreign investment because it allowed an exit route for financial investors in a project.
Venture funds and overseas high net worth angel investors, with stakes in telecommunication and information technology companies, will be able to exit and earn returns on their investments if the norms are relaxed further.
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