SEBI recommends net tangible assets as a criterion for IPOs
By Our Markets Bureau | 26 Mar 2003
Mumbai:
The Securities and Exchange Board of India (SEBI) committee
has recommended net tangible assets (NTA) as a key eligibility
criterion for companies planning to come out with an initial
public offering (IPO).
The draft report of the Primary Market Advisory Committee of SEBI recommended that companies coming out with an IPO should have a minimum NTA of Rs 3 crore in each of the preceding two full years, of which not more than 50 per cent is held in monetary assets.
NTA includes all assets of a company other than intangible assets, not eligible to be recognised as assets, as defined in terms of Accounting Standard on Intangible Assets. According to the committee, tangible existence of a company for a reasonable period is a good eligibility norm, as it would also eliminate fly-by-night operators.
The
NTA criterion should further ensure the physical existence
of the company over a longer term and also ensure that
the company is engaged in a genuine business activity.
Other than the NTA of Rs 3 crore, the company will be
required to have a net worth of at least Rs 1 crore in
each of the previous two years.
