Mumbai: Capital market regulator Securities and Exchange Board of India (Sebi) will fast-track its probe into the 7,136 crore accounting fraud at Satyam Computer Services Ltd (now Mahindra Satyam). Its founder B. Ramalinga Raju confessed to the largest corporate fraud in India’s history in January 2009 in the country’s then fourth largest software services firm.

Raju has been out on bail for five weeks now, paving the way for faster actions, Sebi chairman C.B. Bhave said.

“Satyam will see action to the extent that whatever actions that were not possible because he was in jail would now become possible," Bhave said in response to Mint’s query on the sidelines of a conference of merchant bankers in Mumbai.

He did not elaborate on what these actions would be.

Last week, a senior Sebi official had told Mint that things “will now begin to move fast".

Sebi investigators were denied access to Raju while he was in judicial remand in Hyderabad and had to approach various courts for nearly a month before the Supreme Court (SC) intervened to allow them one interrogation session in February 2009.

According to news reports, Sebi had sent a notice to Raju nearly three months ago, ordering him to explain various issues relating to the accounting fraud. But he refused to do so, stating that he was in judicial custody.

Mint could not independently confirm this.

Raju was granted bail by the Andhra Pradesh high court on 18 August for two sureties of 20 lakh each.

The Central Bureau of Investigation (CBI) last week challenged the bail in SC.

CBI said Raju was capable of influencing the trial in the case, the magnitude of which has since doubled to an estimated 14,000 crore.

Sebi’s proceedings will get a boost if the apex court denies the admission of a special leave petition filed by Satyam’s auditors Price Waterhouse, the official quoted earlier added.

The Bombay high court upheld Sebi’s jurisdiction to interrogate auditors of listed companies on 13 August.

Sebi had issued show-cause notices to all the affiliated firms and 89 partners of the Price Waterhouse franchise in connection with the case. Price Waterhouse has moved SC challenging this judgment.

Insurance IPO

In her address at the seminar, Sebi executive director Usha Narayanan cleared the air on the issue of initial public offerings (IPOs) by insurance firms. She said the regulator will soon come out with disclosure norms for IPOs in the sector. “This issue is engaging our attention. Some norms on that can be expected soon," Narayanan said.

Though Sebi’s disclosure norms are sector-neutral, whenever an issuer from a new sector approaches the market, Sebi prescribes certain disclosure requirements unique to the sector to make the risks associated with it known to the market. No insurance firm has yet approached Sebi with concrete plans to tap the market.

The insurance regulator, Insurance Regulatory and Development Authority, had sometime back submitted its report on the IPO framework for insurance firms to Sebi.

Several life insurers are looking at raising capital by listing their shares on exchanges through IPOs. Current norms allow a life insurer to go public after completion of 10 years of operation.

Reliance Life Insurance Co. Ltd, ICICI Prudential Life Insurance Co. Ltd and HDFC Standard Life Insurance Co. Ltd have announced plans to tap the capital market.

Investment bankers said there wouldn’t be any progress on this unless the Insurance Bill, which proposes to increase the foreign direct investment limit to 49%, is tabled in Parliament.

Tarun Kataria, chief executive of Religare Capital Markets Ltd, said, “JV (joint venture) life companies will not be able to access the public equity markets until the foreign ownership rules are relaxed."

Sebi is also working on guidelines for rights issues of Indian depository receipts (IDRs). In May, Standard Chartered Plc listed its IDRs on two domestic exchanges.

“Though we have only one IDR issue so far, if the company comes out with a rights issue in the home country, the IDR holders here will also be eligible for such rights. The existing regulations do not provide for this. We are working on relevant norms," Narayanan said.

Meanwhile, Sebi has appointed a panel comprising commercial and investment bankers, and IPO brokers to popularize the banking channel for subscription to public issues. “At present, we are seeing around 18-20% of the applications coming through this route. We need to see how we can enhance participation," Bhave said.

Sebi is looking at ways to incentivize intermediaries to enhance the flow of applications through this channel.

Narayanan said Sebi wants to iron out even relatively small issues such as common IPO forms to encourage the use of banking channels, which is critical to cut the time between a public issue and its listing.

“There were representations that printing separate forms for Asba (application supported by blocked amount) is escalating costs of intermediaries. We’re working on a common application form for Asba and non-Asba applications with differentiation through colour coding," she said.

Asba ensures that once an investor subscribes to a public issue, money in the person’s account is blocked till allotment is made. If shares are not allotted, the money gets released immediately; otherwise it would have taken two weeks.

Bhave urged the investment banking community to leave more on the table for investors in public issues. He said investment banks should not forget investors in the intense competition to give a good price to the issuer and win mandates. When issues are priced higher, investors do not earn much on listing.

According to a study of 116 IPOs by ratings agency CARE, between August 2007 and August 2010, 62% of them were trading higher than the upper IPO price band. “The IPO mispricing was prevalent in 2007 and 2008 with about 75% of the issues being overpriced," the study disclosed.

Bhave also asked investment bankers to take a close look at issue of zero fees for public sector issues.

“You are outbidding each other so much that many issues are being done for free. You need to ask yourself if this is healthy," he told bankers.

Harini Subramani contributed to this story.