If investment bankers are not making a killing managing a public issue, they can apparently come close to killing the issue. Just ask Coal India.
India’s largest ever initial share sale is getting mired in controversy instead of earning plaudits. The Securities and Exchange Board of India (Sebi) wrote to the firm on Wednesday, asking it to give potential investors the option to withdraw bids. Why? Because the prospectus misstated a simple figure. Whose fault? The merchant bankers: They, after all, guarantee the firm and its financials.
Perhaps these bankers were too busy falling over themselves in the race to manage these issuances. Sebi chairman C.B. Bhave worried last month that, thanks to the intense competition, bankers were quoting near-zero fees. If you charge Rs1 for an issue, something’s gotta give.
More than the regulator, firms looking for capital should be worried. Or they should pray they can pull a Google: go public without the bankers.