No informal push for safety net in IPO-bound companies: Sebi

Sebi chief says PE segment needs an image makeover

The Securities and Exchange Board of India (Sebi) wouldn’t informally insist on a safety net for companies opting for an initial public offering (IPO), Sebi Chairman U K Sinha said here on Tuesday. “I have asked my people not to do it. If anybody in Sebi is compelling you, let me know,” Sinha said at the IVCA Conclave 2013.

Private equity (PE) players had expressed concern on the voluntary safety net provisions being “informally” enforced by Sebi officials clearing IPO documents. Sinha said the move to formally introduce a safety net in IPOs had been put on hold, following a large number of responses against it. As most IPOs had traded below the issue price, Sebi had floated a proposal to make it mandatory for promoters to buy back shares if these fell below a threshold.

Sinha said the PE industry required an image makeover. The industry should make people understand “it is not a set of greedy people who want to make a fast buck and move on”, he said, adding it also needed to address a perception spread through films that PE funds destroyed companies and resulted in job losses and exits of promoters. The fact that the industry has brought in about $60 billion and helped about 3,000 start-ups should be highlighted, he said.

Sinha indicated some of his fellow regulators also shared this perception. “I often feel frustrated by the type of responses to the role and function of the industry,” he said, assuring Sebi was keen on a constructive dialogue with the industry to address concerns.

He was also open to suggestions on delisting guidelines, which many PEs felt was a hindrance to the way in which they functioned.

Sinha also assured Sebi would take up the issue of restrictions on domestic venture capital funds investing in microfinance and housing finance companies. “One fellow regulator has reservations on this matter. My information is it is perhaps not a good time to push for it. When the macro situation improves, there may be an opportunity to revisit.”

He added said there was a huge opportunity for PE funds in the small and medium enterprises segment.