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Data Access (India)'s initial public offering, which was to have opened on Monday, stands deferred. This follows the Securities and Exchange Board of India issuing a letter on Saturday afternoon to the company seeking clarifications in connection with its IPO.
The capital market watchdog also asked Data Access not to proceed with the Rs 80-85 crore (Rs 800-850 million) equity issue until it evaluated the replies, said Data Access managing director Siddhartha Ray. The Sebi move comes within a fortnight of its granting approval for the IPO in mid-March.
Although the company has responded to the issues raised by Sebi, it is now "looking at an IPO some time in May". The Data Access issue of 50 million equity shares of Rs 10 each was slated to be offered to the public through the book-building process in a price band of Rs 17-20.
Data Access claims to have a 30 per cent share of India's international long-distance telecommunications market with in-bound calls accounting for 100-110 million minutes per month of a total 300 million minutes per month and outbound calls accounting for 9.5-10 million minutes per month of 80 million minutes per month.
Sebi sent a letter (CFD/DIL/5128/2004) to Data Access at 2 pm on Saturday afternoon, with an attached letter by an individual to the regulator making allegations on certain issues, according to a company's release.
Data Access responded to the issues raised by fax by 5:30 pm on Saturday, but the Sebi office was closed, said Ray. Hence the company decided to postpone the issue, he added.
"The letter raised some wild allegations, including Foreign Exchange Regulation Act issues, money being owed to Bharat Sanchar Nigam Ltd, disconnection of points of inter-connectivity, among others," Ray told Business Standard. The letter to Sebi was from an individual residing in Colaba, Mumbai, he said.
The letter alleged that Data Access owed Rs 84 crore (Rs 840 million) to BSNL as of December 2003. On this, Ray said as per an internal agreement signed between the company and BSNL, Data Access could keep its dues pending for 15 days to two months.
Ray added that between December 2003 and March 2004, the company had paid Rs 300 crore (Rs 3,000 million) to BSNL. "On a monthly basis we pay Rs 50 crore (Rs 500 million) to BSNL," he said.
The letter also alleged that BSNL had disconnected Data Access' points of interconnectivity. To this, Ray said of the 21 points of interconnectivity, three were not operational as these were not viable for Data Access.
These are in Agra, Lucknow and Orissa, he said, pointing out that operating the points of interconnectivity depended on the commercial viability and there was not adequate traffic in three locations.
The letter also alleged that directors of Data Access had violated Fera, to which Ray said Sebi had been informed that none of the directors had any Fera cases against them.
It was also alleged that some foreign equity had come into the company through unlawful means, said Ray. However, he responded to Sebi stating "the last foreign direct investment had come in April 2002 for a sum of Rs 17 crore (Rs 170 million) from Richard Li's Pacific Century Cyber Works (PCCW)", which has a 24 per cent stake in Data Access.
"This foreign investment came through proper channels and it has been clarified to Sebi that whatever I owe or funds received have all been captured in the books of accounts," said Ray. In the prospectus, under the item sundry creditors, Data Access owes a sum of Rs 250 crore (Rs 2,500 million) as of September 2003.