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).
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.
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.
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.