Come November, merchant bankers will have to disclose the performance of their past issues in all draft documents. The capital market regulator, as part of its attempts to make investors better-informed, has made the disclosures mandatory for any prospectus filed on or after November 1.
According to the Securities and Exchange Board of India (Sebi), merchant bankers will have to disclose data for all issues managed in the last three financial years. The disclosures will include the issue price, share performance on the day of listing and the price movement on the 10th, 20th and 30th day. The same has to be compared with the movement of the benchmark index, said a circular issued on Tuesday.
Further, merchant bankers will also have to publish a "summary statement of disclosure", which will essentially categorise the past issues based on the quantum of discount or premium to the issue price. If an issue is being managed by a group of merchant bankers, then each of the managing banker will have to make the disclosures.
The issue gains significance when seen in the light of the performance of most of the recently-listed companies. The share price has been falling below the issue price on the first day itself and the role of investment bankers had come under the scanner. This probably also explains why Sebi wants banks to disclose share price related information in the document.
Incidentally, the Sebi move comes nearly a year after the idea was first mooted as part of a discussion paper. "It is proposed that all merchant bankers be directed to disclose the track record,” Sebi had said in a paper circulated around November last year.
The regulator was of the view that the track record of the merchant banker managing the issue would act as a good barometer for making investment decisions. The regulator further said that the disclosure should be made available in the offer document and also on the website of the investment banker.
Merchant bankers and Sebi deliberated on this issue for long as the former remained opposed to any such move. Merchant bankers felt they couldn’t be held responsible for the price movement post-listing. Early this year, a committee was formed with representations from investor associations, banking fraternity and the regulator. While bankers were not fundamentally against disclosures, it was the format and the contents they were disputing.
The application-cum-bidding form in public issues have been standardised to make it investor friendly and to ensure uniformity in bidding and accuracy.
Sebi has decided to have only a single form for Asba and Non-Asba applicants. The application-cum-bidding form, accompanied with abridged prospectus, would be printed in a booklet form on A4 size paper.
To ensure uniformity and to facilitate easier identification, the regulator has decided to standardise the colour of the form for different categories of applicants. The new format will be applicable on all red herring prospectus/prospectus filed with Registrar of Companies on or after November 1.