In Coal India’s prospectus, two figures have got altered. SEBI, whose decisions are often biased and whimsical, has insisted that investors must be allowed to withdraw their bids on such a negligible mistake

The Securities and Exchange Board of India (SEBI), whose decision-making has always attracted charges of inconsistency, bias and whimsicality, is probably out to redeem itself. It is out to show that it is a stickler for rules and willing to throw the rulebook at even large public sector companies.

Therefore, in a bizarre instruction, it has also forced Coal India Limited (CIL) to give all investors, including the institutional bidders, the option to withdraw their bids for a trivial mistake in the prospectus. CIL was asked to issue advertisements in newspapers to make the small correction but part of the ad is an offer to investors to withdraw their bids just because two figures got interchanged.

Consequently, at a time when the Disinvestment Ministry and CIL should be celebrating the extraordinary success of a 12-time oversubscription of a gigantic Rs15,000-crore issue, that too only to retail investors, they are smarting under what is considered SEBI’s rigid stance.

Coal India today issued a notice to investors, which essentially corrects one typographical error. The figure under ‘accretion in stock’ and that under ‘other income’ for the quarter ended 30th June 2010 got inadvertently inter-changed. So accretion in stock should read as Rs54.45 million instead of Rs31,945 million and other income should read the opposite. While the numbers seem huge, there is no change in total income figures or the summary statement of profit and loss.

In any case, it is clear that it was a tiny slip.

Stunningly, for such a minor error, SEBI has asked CIL to not only issue a correction advertisement, but also asked it to give investors an option to withdraw their shares for this correction. According to sources, SEBI was acting on a complaint received from an investor.

In ads issued today, CIL has said, “In view of the above kindly note that Bidders (including QIB bidders), if they so desire, may withdraw their bids.” The request for such withdrawal will have to be made before 5pm today before the retail issue closes.

It is another matter that this correction is hardly going to affect the subscription of CIL, unless the original complaint itself was mischievously designed to disrupt the disinvestment process. However, so strong is the momentum for buying good stock that investors whom Moneylife spoke to this morning were unconcerned.

We also learn that there were discussions at the highest level of the government to allow CIL to issue a correction without the offer of withdrawal, but SEBI refused to budge. The question is, was SEBI adhering to the highest standards of fairness and discipline or was it being stubborn to send a signal to the government that it cannot be ‘influenced’? There will always be two opinions on the issue. But two facts are abundantly clear. One, the mistake is inconsequential. It is not an omission but a mere typographical error with no material impact on profitability numbers.

More pertinently, public sector companies, ever since the disinvestment programme began in 1991, have not followed the normal disclosure rules. It may be remembered that Mahanagar Telephone Nigam Limited (MTNL) was listed even without a prospectus! Even today, government companies are listed with a floating stock that is way below the mandatory 10% applicable to all companies. Interestingly, SEBI has not implemented the minimum shareholding norm ever, despite the occasional warning by the previous SEBI chairman. — Sucheta Dalal