IPO Scam in India

This scam refers to the many companies that were floated and which raised public funds through initial public offernings only to later disappear without a trace taking with them, the investors capital. The root of this menace can perhaps be traced to 1992 when, in the name of `liberalisation', the government abolished the office of the Controller of Capital Issues (CCI) with a one-line order and asked the Securities and Exchanges Board of India to monitor the capital market. Many promoters took advantage of the prevailing situation, which allowed them to raise money from the public at fancy premiums, with the role of SEBI reduced to merely vetting Initial Public Offers prospectuses.

Between April 1992 and March 1996 more than 4,000 companies raised more than Rs 54,000 crore from investors through public and hybrid issues. Another 1,500 companies raised over Rs 34,000 crore through rights issues at very high premia. With practically no supervision from either the SEBI, the stock exc...