I-bankers ready to share their past with you, but not as Sebi sees it

Ashish Rukhaiyar
Mumbai, 13 May 2011

Oppose track-record disclosure format prescribed by the regulator; committee formed to resolve differences.

The Securities and Exchange Board of India (Sebi) has formed a committee to try and resolve differences with investment bankers on the format of disclosure of the latter’s track record. It is pushing this to enable better-informed decisions by retail investors.

It was last November when Sebi said it wanted such disclosures. The idea is that investment bankers record their past performance in the draft document of the issues they manage. It took four-odd months for Sebi to propose a format, one focusing on the stock performance of companies. Bankers opposed this and a committee was formed last month. It has representation from investor associations, bankers and the regulator. It has met since.

“The Sebi move is more driven by the investor associations and the kind of disclosures that are being talked about will not really be relevant,” said an investment banker who has been part of the deliberations. “A lot of information is not in our control or we don’t know. Once the stock is listed, the market conditions play an important role.”

Bankers, however, are not fundamentally against disclosure; they dispute the proposed format and contents. Sebi wants the bankers to list the share price movement of all issues they had managed in a specified period, say the past three years. They need to disclose the issue price and the price as on a particular date to ascertain the returns generated.

Another banker, an office-bearer of the Association of Merchant Bankers of India (Ambi), their umbrella body, says the disclosures should be more about the type of deals the banker managed in the past and whether any of the issues were either withdrawn or devolved.

“What we have suggested is that you can give data related to what type of deal that one has done and not necessarily how it has performed,” said this banker. “For instance, say the bank helped raise X amount of money in the past few years through IPOs, FPOs, rights, equity, debt, etc. Whether any of those have been devolved. How many deals of a similar size or larger has the bank done in the last two years. Whether they have decent amount of expertise or not.”

The issue gains significance when seen in the light of the performance of most recently-listed companies. The share price has been falling below the issue price on the first day itself and the role of investment bankers has come under the scanner. This probably also explains why Sebi wants banks to disclose the share price-related information in the document.

Bankers maintain that share movement data may not be helpful, as the price as on a particular date does not give the correct picture. Share price need not really reflect the company’s performance, they say.