MUMBAI, January 23: The Securities and Exchange Board of India's plan to bring the booming private placement business under its regulatory framework is unlikely to materialise in the near future.According to SEBI chairman D R Mehta, companies are taking advantage of the existing Companies Act to privately place debentures and bonds in the market. "We had written to the government about the need to plug the loophole and bring private placement of debt under regulation," Mehta said.
It will take several months for the new government - which comes to power at the centre after the elections - to have a close look at the revised Companies Bill and get it passed in the Parliament. "If a new party is coming to power at the centre, there can be even changes in the revised Bill. There are already differences of opinion among various parties about the reform package," said a merchant banker.
Even as the process of bringing the private placement under the SEBI control has got stuck, companies are merrily going
around making private placement of debt. With the government and SEBI unable to check such private fund mobilisation, every Tom, Dick and Harry is finding it convenient to raise money through this route.
As a result, the first six months of the current fiscal (April-September) have witnessed a 52 per cent increase in the amount raised through private placement of debt at Rs 13,585 crore. On the other hand, the primary market for debt and equity has seen only Rs 341 crore being raised in the first half of the current financial year.
As many as 80 institutional and corporate organisations came out with 107 issues during this time. However, only 80 issues were rated by credit rating agencies. A majority of investors in private placement business continued to be institutional investors like financial institutions, banks and provident funds.
"The attraction in going for private placement is that companies don't have to go to the SEBI for appraisal of bond issues offered on a private placement basis.
Companies can get a away with the money without any scrutiny," said a banker.
SEBI is now getting ready to bring plantation companies under its regulatory framework. Around 350 such companies have approached SEBI for registration in the last one month and SEBI is planning to inspect the books 50 plantation companies shortly. It is learnt that four plantation companies Golden Forest, Enbee, Anuhbhav and Sterling -- have collected amounts ranging from Rs 500 crore to Rs 1,000 crore.
According to Mehta, the proposed Stock Watch system -- a system of market and surveillance which would trigger alert signals based on abnormal price or volume fluctuations of any scrip traded on the exchange on an online basis -- is not ready due to delay in the software package. The system was expected to be implemented by all the exchanges by the end of 1997.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
