The Sarbanes-Oxley Act of 2002, introduced in the US after the Enron and WorldCom fiascoes, could pose a hurdle to India Inc's fund raising plans.
At least 20 Indian companies are eyeing the US markets to raise funds to enhance their capital base or dilute promoter holdings. But the companies will have to comply with accounting standards under the new US Act.
According to Frank Brown, senior partner, global assurance and business advisory services, at PricewaterhouseCoopers, while Indian firms are arming themselves to meet the new accounting challenge, they will face difficulty in tapping the global markets with initial public offerings.
"The global IPO market is very fickle and timing is everything," Brown said. Much depends upon the quality of financial performance as the IPO market is not very strong today and has been shut down for the past one year, he added. Only five IPOs have hit the US in the last three months.
Brown said if corporates wanted to access global capital markets, they need to start preparations from today.
"Changes in the law (the Sarbanes-Oxley Act of 2002) will not affect Indian companies dramatically if they comply with regulations. Otherwise, they will not be able to access the markets," Brown said.
"Much of the conversion process from Indian GAAP to US GAAP takes anywhere from one to two years if not more," said Roopen Roy, head of global assurance and business advisory services in India.
While stating that financial reporting standards are good in India, Brown said in the case of independent audit committee 'there is a lot of provision of the law that needs to be complied with.'
However, according to Brown, compliance with the Sarbanes-Oxley Act itself won't boost the markets. Do things really improve because of regulations or the change in the mind set, he asked
The latest PricewaterhouseCoopers Management Barometer, a quarterly survey of top executives with large, multinational businesses, stated that only about a third of executives at felt that the new law itself will restore investor confidence in the markets or aid their companies' ability to create shareholder value.
The global capital markets group of PWC is spread across 30 countries. The group is working with 20 Indian clients, spread across banking, energy, FMCG and telecom sectors, which intend to raise funds overseas.
