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‘IPO ads can be innovative but risk disclosures must’

Primary market has been mostly sluggish for the last few years as companies have been finding it unattractive to enter capital market to raise funds through sale of shares, although Sebi has taken a number of steps to revive this segment.

Asked whether Sebi would allow the companies to be innovative to make their public offer advertisements more attractive, while disclosing key risk factors, the Sebi chairman said ‘that is mainly for the companies to decide’.

The public offer advertisements, which are aimed to hard-sell the IPOs and FPOs among potential investors, typically follow similar formats containing numerous details without any usual creativity associated with other ads.

‘Our role is that we want the advertisements should not be misleading and the risk factors and substantial facts are not suppressed,’ Sinha.

‘The disclosure about risk factors and substantial facts are mandatory requirements and we cannot compromise on that. But, within this framework, if the companies want to be innovative, they can certainly do it and they are most welcome to do that. We have not stopped them from being creative or innovative, but certain things have to be provided,’ he said.

Sebi has been taking a number of steps to boost the primary market and its board on Tuesdsay also approved certain measures to make funding-raising process easier.

The board approved making the initial public offerings (IPO) grading mechanism by credit rating agencies voluntary, while companies have been allowed to file shelf prospectus with one-year validity for multiple issuance of debt securities.

Still, the IPO market has been sluggish for almost three years and IPO proposals worth Rs 72,000 crore are yet to hit the market despite having got regulatory clearance. The last major IPO was from state-run Coal India in 2010.

Among various reforms, Sebi has introduced an e-IPO mechanism through which investments can be done online without signing any physical documents. This has helped fast-track the public offer processing time.

On account of streamlining of process and other external factors, the average time taken for processing offer documents has also come down from 152 days to 48 days.

Besides, a facility to procure and submit IPO forms is now available to investors in more than 1,000 locations as Sebi has allowed use of stock broker network of stock exchanges for submitting applications.

The investors are also now directly able to submit ASBA (amount supported by blocked amount) applications in more than 67,000 bank branches as against less than 10,000 branches that existed earlier.

Rs 8,663-crore IRFC public issue to begin on 6 Jan

Mumbai:
Indian Railway Finance Corp (IRFC) will hit the market on 6 January to raise more than Rs 8,660 crore through tax-free bonds.

The issue of tax-free and secured non-convertible bonds, worth around Rs 8,663 crore, will close on 20 January,  IRFC said in the prospectus filed with market regulator Sebi.

‘Public Issue by Indian Railway Finance Corporation of tax free, secured, redeemable, non-convertible bonds of face value of Rs 1,000 each in the nature of debentures having tax benefits...for an amount of Rs 1,50,000 lakhs with an option to retain over-subscription up to Rs 7,16,300 lakh aggregating to Rs 8,66,300 lakhs in the fiscal 2014,’ the company said.

The funds raised through this issue will be utilised by Indian Railway Finance Corp towards financing the acquisition of rolling stock which will be leased to the Ministry of Railways in line with present business activities.

Indian Railway Finance Corp is a dedicated financing arm of the Ministry of Railways. Its sole objective is to raise money from the market to part finance the plan outlay of Indian Railways.

SBI Capital Markets, A K Capital Services, Axis Capital, ICICI Securities and Kotak Mahindra Capital Company are the lead managers to the issue. Karvy Computershare is the registrar to the issue. The bonds are proposed to be listed on the National Stock Exchange and Bombay Stock Exchange (BSE).
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