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SEBI steps in to prevent infotech IPO scam

The Securities and Exchange Board of India (SEBI) has restricted the entry of information technology related companies into the capital market by imposing conditions of three-year track record of profits in IT-related business.

In its board meeting in Mumbai today, SEBI decided not to allow any financial companies or others to offer share of their IT-related business unit without a track record of three years in IT business itself. This would restrict several new IT-related companies to raise funds from the public.

According to SEBI chairman D R Mehta, 21 companies in the IT sector has filed applications with the SEBI in recent weeks seeking permission for floating Initial Public Offer (IPO) of shares.

If the IT company does not fulfil the criterion, it could access the market through the alternative route of appraisal and financing by a bank or financial institutions. The same conditions would apply to a listed company also which changed its name to reflect activities in IT sector, Mehta said.

According to latest statistics, in the April-September period, SEBI received 46 documents for public offer of which 21 are software firms. Of this, 34 companies including 11 software firms were allowed to raise funds through public issues to the extend of Rs 3121.87 crore. The eleven software companies raised about Rs 465 crore from the market.

(UNI)

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