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SEBI meet to finalise moves on ESOPs, primary issue pricing and credit rating agencies

L Prashanth in New Delhi

The Securities and Exchange Board of India at its board meeting in the capital on March 19 will finalise the guidelines for implementation of the employees stock options or ESOPs programme and flexibility in pricing of issues in primary market.

SEBI chairman D R Mehta said the board will also take up the issue of regulating the credit rating agencies.

The Prof J S Verma Committee of SEBI had issued draft guidelines for ESOPs after the same was announced by the finance ministry last year.

However, industry associations like the National Association for Software and Service Companies or NASSCOM have been lobbying for relaxation of guidelines to retain talent in the industry, more so in the technology companies.

The industry is also seeking liberal taxation norms for ESOPs.

On finalising the regulations for CRAs, the SEBI will consider the Vijay Ranjan Committee which had laid down a draft report recently.

The committee had recommended that the promoter of CRAs should either be a public financial institution, a scheduled bank, a foreign bank operating in India or a foreign credit rating agency.

Further, the committee said the promoters of a CRA should collectively hold 26 per cent of the paid-up capital of a CRA for a minimum period of five years.

Apart from compulsory disclosure of unaccepted ratings to investors, the committee had said that uniform rating symbols across CRAs should not be insisted upon.

Merchant bankers had represented to the SEBI that issuers be allowed to fix the issue price, in consultation with the lead managers, as nearly as possible to the opening of the issue or filing of the offer documents with the registrar of companies or stock exchanges.

When approved by SEBI, the issuers will be allowed to mention a price band of 20 per cent in the offer document submitted to SEBI for vetting. The actual price could be determined at the time of filing of the offer document

SEBI had earlier said that the draft offer documents submitted for vetting should contain suitable explanatory notes, indicating the financial implications, if the price were to be fixed at different ranges, within the price band approved by the board or general body.

The final offer document, however, will have only one price and one set of financial projections and it should be ensured that the cap in the band should not be more than 20 per cent of the floor price.

The Vijay Ranjan Committee had suggested that SEBI's inspections of the CRAs should not normally judge the appropriateness of analysis by CRA for arriving at a rating decision. Moreover, standardisation of methodology across CRAs should not be insisted upon, it had said.

It had said the composition of the rating committee should be left to the discretion of CRAs while they should not be allowed to invest in the securities issued by their clients. The CRAs should be required to frame their own norms for investments in such securities which inter alia should have mechanisms in place to prevent misuse of insider information.

Moreover, deterioration of financial condition of a CRA should not be a reason for suspension or cancellation of certificate of registration of a CRA.

Maintaining anonymity, top SEBI officials said the board will not consider imposing any more norms on software and infotech companies whose scrips have recently shot up at the stock exchanges.

''We have already laid out regulations like mentioning the contribution of software business in the quarterly results of these companies. Besides, technology scrips have gained value all over the world,'' sources said.

UNI

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