The Securities and Exchange Board of India, or Sebi, will assess the experience of issuance of shares by private firms on the newly-introduced auction window before carrying out any review of the rules after last week's share sales by the state-run ONGC.

The sale of 5% of ONGC shares was the first to be kicked off after Sebi allowed auctioning of securities through a separate window, where investors are required to make an upfront payment, with the settlement to be done on what is known as trade-for-trade basis. In a trade-for-trade settlement, the buyer cannot sell the shares on the same day of purchase until those shares are delivered into his account.

Also, intra-day squaring of positions is not allowed. Besides this, Sebi rules say that the settlement should be completed within two days of the closure of the offer.

While there has been criticism relating to the way in which the ONGC share sales was completed, both regulatory and stock exchange officials said that there were no problems with the new system of auction of shares. According to investment bankers, where the issuers goofed up was in terms of keeping the order book closed which meant that potential investors had access to information only towards the close.

Sebi rules mandate stock exchanges to disclose the indicative price - the-price at which the maximum bids are placed - half-an-hour before the offer closes. But, in the ONGC offer, the exchanges could not put out the indicative price considering that the order book was yet to be filled as a lower number of bids made it difficult for them to arrive at a value.

While the indicative price was allowed to be disclosed during the last 30 minutes of the duration of closure of the offer, bid quantity information was allowed to be disclosed at certain time intervals.

Investment bankers say that the bid quantity information was not sufficient to provide direction to investors to decide on the price. For instance, in an IPO, investors get a sense of how the book is being built both in terms of bid quantity and indicative price as the details are uploaded by exchanges on a real time basis.

Many now blame both the government and the investment bankers who handled the share sales for not adequately marketing the issue, for pricing the issue at a premium and for not delivering in terms of commitment from investors.

A senior regulatory official said that if Sebi finds any short comings in the new system, it would address the concerns of investors and issuers. "If there are any learnings from this issue, we are willing to accept it but we need to wait and assess the experience of a few more issues through auctions before thinking of making any changes," an official said.

Investment bankers say that if auctioning of securities was meant to be an open and transparent process then the bid details ought to be disclosed. "Investors would find this auction process very attractive if the 100% margin is done away with and the entire settlement is done like any other stock market transaction on a T + 2 basis," said V Jayasankar, senior ED and head of equity capital market at Kotak Investment Banking.

According to him, the floor price can be announced to the stock exchange one hour before trading starts in order to factor in the capital market sentiment. (Economic Times)