The Securities and Exchange Board of India (SEBI) is contemplating introducing a process audit — to be carried out by an independent auditor — of initial public offerings or IPOs.
The auditor would examine the procedures followed by registrar & transfer agents responsible for processing applications and maintaining records of allotted shares during a public issue.
As per the current practice, exchanges obtain and upload data provided by registrars. But there is no way of verifying whether due and uniform process has been followed in all the cases, such as whether discarded applications have been rejected by following the uniform policy.
Currently, different registrars follow different processes during the execution of an IPO.
“An independent auditor would check whether the correct processes have been followed and submit a report to the exchanges as well as the merchant banker,” said a person familiar with the matter, declining to be identified.
The timelines for IPOs are also being crunched for intermediaries. Sebi has reduced the time between the close of a public issue and listing on exchanges from 22 to 12 days, which may be contributing to errors, experts said.
Recently SEBI had temporarily barred retail brokers whose errors had resulted in non-allocation in the Coal India IPO where technical glitches reportedly led to thousands of investors not getting the shares to which they were entitled.
The Institute of Company Secretaries of India had earlier proposed a detailed certification of the various processes followed by a company when coming out with a public issue.
SEBI seemed disinclined to make such a process mandatory because of the increase in the costs for coming out with an IPO, but it has said that exchanges could look to introduce the same on a voluntary basis, according to a source.
An email sent to SEBI on the matter went unanswered.