Damodaran: Not now

New Delhi, Feb. 17 (PTI): The Securities and Exchange Board of India (Sebi) today deferred a decision on mandatory grading of initial public offers (IPOs), while deciding to set up a committee on derivatives market and frame regulations for investment advisers.

However, the issue of allowing institutional investors to short sell securities, that is to trade in securities without owning them, was not taken up at the Sebi’s board meeting held here.

“The board decided to take a final call (mandatory) on grading of IPOs, after a credit rating agency makes its presentation to the Sebi board,” Sebi chairman M. Damodaran told reporters after over an eight-hour meeting today.

Sebi is slated to hold its next board meeting some time next month, he said.

At present, it is optional for companies to go for grading of their IPOs. Icra, Crisil and CARE are now in the business of grading these IPOs.

The primary market advisory committee of Sebi had recommended mandatory grading of IPOs on a trial basis for six months.

Damodaran said the meeting also decided to set up a committee to study various aspects of derivatives market and suggest changes if any and identify new products to be introduced in this segment.

The committee, to comprise experts and academicians among others, would not be very big, he said when asked about the constitution of the panel.

When asked whether a decision on delivery-based settlement in options market would be taken after the committee submits its report, he said nothing stops Sebi from taking a decision at any time. An over six-year old derivatives market in India has come a long way and overtaken the cash segment of the Bombay and National stock exchanges.

The market regulator also decided to frame regulations on investment advices given to investors through various channels of communication, he said.

When asked whether the regulations would specifically be for the media, he said there are many means of communications besides the media.

The purpose of proposed regulations would not be to help in determining price mechanism, but help investors take informed decisions, he said.

The meeting also discussed the progress made in respect of demutualisation and corporatisation of stock exchanges and progress made in respect of implementing the recommendations of the RH Patil committee report on corporate debt markets, he said.

On separate exchanges for small and medium enterprises, he said Sebi's intention is not to start such bourses but create enabling environment to help those interesting in doing so.