Sebi may introduce accounting norms to value dotcoms
Mumbai: Following the boom in the dotcom craze, the Securities and Exchange Board of India, (Sebi) has initiated moves to formulate a standardised set of accounting norms for valuing dotcoms. The standardised norms are expected to help lay investors assess dotcom companies before investing in them.

As a result of this, prospective dotcoms will also be expected to make disclosures on the basis of these norms, whilst preparing offer documents and coming out with initial public offers (IPOs). A detailed paper has been prepared on the subject and will be discussed at the meeting of the YH Malegham committee on accounting standards on June 6.

The norms are expected to deal with standard norms for parameters like the average revenue per customer per year from purchases by its customers, revenues from advertisements, total number of prospective customers, the contribution margin per customer, the average cost of acquiring a customer and the proportion of customers lost each year.

The paper also states that use of valuation models should be based on comparison with traditional companies in the same line of business. However, no comparison is available in this sector and comparison with the software sector would not give the correct picture as the software sector is based on strong fundamentals and sound revenue models, though mistakenly, investors tend to compare internet companies with software companies.

The paper has also laid down norms for accounting issues like accounting of intangible assets, revenue recognition, income recognition and recognition of pre-operating expenses for capitalisation.
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Ministry for steps against rigging
New Delhi: Prompted into action by the sharp movement in recent months of share prices of companies, whose financial performance has been ordinary or where it was driven up after quoting at low levels, the finance ministry has taken up with the Securities and Exchange Board of India (Sebi) the issue of preventing rampant rigging of stock prices.

The ministry has indicated to the capital markets regulator that strong action should be taken against ramping up of share prices and manipulation in the stock markets. The ministry has suggested certain short-term and long-term measures, which need to be put in place to prevent such practices.

These include among other things placing a ban on short sales, netting of long positions and extension of the rolling settlement mode to more scrips. The government it appears is not willing to concede to the arguments against extending the rolling settlement to A group scrips made by the regulator, the BSE and some market players. They were of the view that it would impact on liquidity and would result in lower volumes, a theory, which the ministry was not willing to buy.
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