Sebi In Bid To Push Mncs Towards Public Issue

The Securities and Exchange Board of India (Sebi) will be making a representation to the industries ministry to persuade multinational companies - which have set up their wholly owned subsidiaries here - to go public with an issue of equity shares.

The capital markets watchdog is planning to ask for a due-diligence exercise of these companies and a scrutiny to be undertaken to gauge their financial health.

"From their current cash flows and future projections of their cash flows we can arrive at an estimation of their financial health," a Sebi official said.

The regulator, having no authority in this regard, is planning to get the support of the concerned ministry to intervene with the companies.

"Now that the Bharti IPO has been oversubscribed, and there is a lot of interest being generated over the disinvestment of public sector enterprises, we think that confidence in the primary market has been restored to some extent," said the official, adding that now would be the right time for the multinationals to make their offerings.

Sebi is also planning to apply pressure on the MNCs through the various industry associations and raise it in various fora so that a pressure lobby is built up.

A number of companies -- including Coca-Cola, PepsiCo among others -- have set up operations in India on the agreement that they would be going public after three years from the date of setting up their operations here -- this time being necessary for them to stabilise their business in the country.

"However in some cases more than three years have passed and they have no intention of coming to the market," the official pointed out.

Incidentally, just last year Coca-Cola had asked more time for making a public issue on the grounds that it was not a profit making entity and hence did not comply with Sebi's profitability track record.

However, Sebi officials said that these were all excuses since current regulations allow non-profit making entities to make a initial public offering provided that the public issue was through book building process with 60 per cent being subscribed to by Qualified Institutional Buyers (QIBs).