A week after the Y.H. Malegam Committee on disclosure requirements in offer documents submitted its report to the Securities and Exchange Board of India (SEBI), Business Today's Roshni Jayakar met up with Malegam. Excerpts:

What made you suggest the deletion of some 58-odd requirements from the existing guidelines?

We found that SEBI had issued, over the years, 302 standard observations applicable to all offer documents. We studied these and listed those that we felt redundant. The broad guiding principles were: the concept of materiality, the need to balance benefits to the investor with the cost to the issuer, the beliefs that excessive disclosure is counterproductive and clarity and unambiguity.

The promoters seem to have come in for special consideration.

You can't put an obligation on the merchant banker without putting the primary obligation on the promoter. And one has to have a reasonable definition of a promoter.

Isn't it important to institute stringent punishment norms for defaulting merchant bankers?

If there is a breach of regulation, then punish the merchant banker by withdrawing his registration. This is a big deterrent.

Was there a disagreement on the extent of disclosure about litigation?

Our majority view was you cannot disclose everything about litigation as it would put an unfair burden on the honest promoter. The minority view was to disclose everything. We set out our arguments and decided to let SEBI take a view.

Is India Inc On A Roll?
Results for Q1 are good, but the answer to the original question isn't a straightforward one.

As this magazine goes to press, 318 companies have declared their results for the April-June quarter and what numbers we've seen! Aggregate sales have increased by 33 per cent (over the same period last year), and aggregate net profits by 41 per cent. "The initial numbers were exceptionally strong for sectors like banking, technology, and metal, and we expect this strong performance to continue in the coming quarters as well," says Nilesh Shah, Chief Investment Officer, Prudential ICICI Mutual Fund. He's right: even after making allowances for the first-comer bias (companies that do well declare their results much before those who have done badly, or traditionally do badly), the results are nothing short of staggering.

Still, it isn't as if India Inc. is at its rosiest ever. Here's why: the aggregate operating profit margin of the sample has declined from 37 per cent to 32 per cent. That would mean companies are gaining revenues at the cost of margins. If that is yet to affect their net profits (net profit margins have actually increased from 10.26 per cent to 10.89 per cent), blame it on falling interest costs. And with companies yet to make fresh investments in capital equipment (the investment boom is just beginning, reckon analysts), there has been practically no change in depreciation. With an increase in capital expenditure (and ergo, depreciation) and interest rates imminent, net profits could also come under some pressure. Prudential ICICI's Shah, however, believes this will not happen this financial year. The 52-per cent increase in tax provision (it is based on the projected profit for the entire year and it indicates that profits too will increase) shows that India Inc. shares this belief.

So far, so good.

-Narendra Nathan

Should You Buy TCS?
The IPO is on as you read this and here is what four experts have to say.

Parag Parikh
Chairman,
Parag Parikh Financial Advisory Services
The price band of Rs 775-Rs 900 is good and retail investors
should go for it. It is priced in such a way that all investors in this
company will make money.

Motilal Oswal
Chairman and Managing Director,
Motilal Oswal Securities
As the price band is only around 20 times the expected
March 2005 earnings, it is quite attractive.

Nischal Maheswari
Head (Pvt Clients),
Edelweiss Capital
As the prospective price-earnings multiple (based on the estimated 2005 profit) of around 21 times is close to that of Infosys, it is fully priced and investors should not expect an upside immediately after listing.

K.R. Choksey
Chairman,
K.R. Choksey Shares & Securities
Looking at TCS' prospects (like large infrastructure, prized customer base, brand value), Rs 900 is a fair price and investors should subscribe to the IPO.

-compiled by Narendra Nathan