Our Sebi is so ignorant that it does not enforce even adequate disclosures on issue allotment. In these days, most of the issuers and the merchant bankers choose to hide the allotment details of large applicants who generally decide the course of action of any scrip on listing.

What's more, issuers are allowed to widely publicize their issue advertisements in every nook and corner of the country. But, for disclosing the basis of allotment, the issuers restrict themselves to cheap "statutory ads" in thinly circulated papers in their locality alone. For instance, the Delhi head-quartered PGL marketed its Rs 105 cr equity premium (Rs 20 per share) issue as from Shimla in the north to Thiruvananthapuram in the south, and Jamnagar in the west to Guwahati in the east. Neither any merchant banker, nor any broker, had underwritten any part of the issue. Yet, through a well orchestrated pre-issue publicity campaign, PGL could attract more than 10,000 gullible investors to chip in their money so as to make the company's maiden public issue a success. Through widely publicized advertisements, the company even thanked the investors for fully subscribing to the issue.

Come post-issue. All the applicants got almost full allotment. But, a majority of the investors were not aware of what was going on. In fact, the non-Delhi investors were completely in darkness as the company chose to reveal even the abridged `basis of allotment' only through select Delhi newspapers. Any request (for a basis of allotment copy) e-mailed to the issuer or the lead managers to the issue, JM Morgan Stanley, could not solicit a reply from them. What's more, the merchant bankers' head quarters in Mumbai too didn't bother to have a copy of the basis of allotment for reference!

PGL's public issue closed on July 18. Within three weeks, on August 8, the company made the allotment. But, listing applications were filed only after a month, on September 8.

Interestingly, when the market operators at the regional DSE had shown total disinclination to tread into the scrip, NSE, considered as a den of stock speculators in the country, registered a maiden quote of Rs 40 for this scrip on September 21. Nevertheless, after recording a comfortable gain of 33% over the offer price of Rs 30 on listing, the scrip crashed to less than Rs 19 same day! Next day, the scrip made its debut on BSE at Rs 25.95 but, closed the day in tandem with the NSE rate at around Rs 16.

Since then, the scrip price is more or less stuck around Rs 15. Perhaps, for a company having a pre-issue dividend base of 22%, the current market price around Rs 15 my look attractive. Nonetheless, the company's own `assumption' of pruning the dividend to 14% in fiscal 2001 would certainly depress many souls. Technically too, the scrip appears to be very week. Even though the public issue was reportedly subscribed in full, more than 90% of PGL's issue of 350 lakh shares went to a handful of investors.

In other words, while about 9700 applicants got around 23 lakh shares, just 300-odd allottees had to absorb as much as 325 lakh shares. These investors may like to get out of the scrip at the first available opportunity. Given such scenario, one can hardly think of a market price of above the issue price in the foreseeable future.

On the operational front too, the scene is none too encouraging for PGL. Being a primary dealer, the company is predominantly engaged in trading government securities (G-Secs) and treasury bills. In the mid-nineties, with increasing market borrowings by Government of India, Reserve Bank of India felt the need to develop  the G-Secs market. Accordingly, a number of structural and institutional changes were introduced to develop the G-Secs and the money markets.

Primary Dealers / wholesalers of government securities comprise the first tier of the government securities market.

Satellite Dealers work in tandem with the Primary Dealers forming the second tier of the market to cater to the retail requirements of the market.

The very purpose of the establishment of an institutional mechanism like PDs was to broad base and provide depth to the debt market. However, the PDs have so far dispensed a limited role and failed to increase retail participation in the debt market. Leave alone high net worth individuals, even provident fund trusts hardly avail the services of the PDs. The PDs could have tied up with the banking sector to market G-Sec as a product to the ultimate investor. That they have not even attempted such an exercise is a sad reflection of their ineptitude.

(Arranged by Investar - The Aarthik News & Research Group) [E-mail feedback to:investar@bol.net.in (or) fernando@investaronline.com]