Cyber Media Sends IPO Offers through e-mail..Violating SEBI Norms?

Cyber Media one of the leading IT media company has announced its IPO. The Company has recently sent e-mails containing a letter from the CMD as follows.

The mail below is a letter from our Chairman & Managing Director regarding the CyberMedia IPO. I would request you to support the issue to the maximum extent possible. In case you need the forms, please inform at ipo@cybermedia.co.in or contact any of our offices. With warm Regards Gautam Mukherjee On behalf of Team CyberAstro

Dear Subscriber, I am pleased to share with you that CyberMedia , the renowned specialty media house in South Asia, is announcing its Rs.17 Crore IPO by a fresh issue of 28.225 lakh shares at a price of Rs. 60 each. It's an endorsement and validation of all that this media group has stood for in the past 22 years. In 1982, we made a small beginning by launching Dataquest when the computer industry was barely Rs.100 crores. In these two decades the industry has moved from Rs.100 crores to 80,000 crores; some of start-ups then, are giants today, and we have grown to be a dominant specialty media player. In these years, the Dataquest team has reported, analyzed, critiqued, supported and influenced the industry. And you, have been witness to the developmental role that CyberMedia has played in nurturing and developing the industry. We have taken up issues on behalf of the industry like software piracy, cheaper computers, IT education in school, higher bandwidth and Wi-Fi solutions. PCQuest , has become the most influential decision making magazine for businesses. DQ Channels and DQ Weeks are India's leading channel publications. We have expanded vertically, consolidating the ICT space and we have also laid the building blocks of the telecom, biotech, and consumer electronics industries in the same manner through Voice&Data, BioSpectrum, and Living Digital respectively. We have expanded horizontally as well with other media products including online ( www.ciol.com ), events and television. Our media services include market research ( IDC India ), content outsourcing, multimedia, gaming, and media education ( School of Convergence ). Since inception, our shareholders have benefited by 10 bonus issues and 3 rights issues. CyberMedia has been a continuously dividend paying company for the last 15 years. For the year ended March 31 st 04, the consolidated turnover was Rs.58.1 Crores, EBITDA 7.7 crores, and PAT 3.7 Crores. For the first 9 Months ending Dec 31 st , 2004, the turnover was 50.6 Crores, EBITDA 7.0 crores, and PAT 3.2 Crores. The EPS for 2003-04 is 5.38 and for 2004-05 is 5.96 (annualized). The group was years ahead of its time two decades back and it continues to be so even now. As India expands globally, we are also envisioning global expansion of our businesses. The funds would be deployed in the future globalization of CyberMedia : To expand its Media Services arm, in the content BPO space in U.S and European markets To launch Global Outsourcing , a BPO magazine, with readership in U.S and India Launch BioSpectrum in Singapore, where the government has an aggressive investment push on the biotech sector Launch Business Week, India to fulfill the need gap of relevant global business content for the Indian reader (awaiting clearance from Ministry of Information & Broadcasting). At this point in time, I look forward to your participation in the IPO. Regards, Pradeep Gupta, Chairman & MD, CyberMedia Disclaimer: Any investment is subject to market risks. Please refer to the offer document at www.sebi.gov.in or www.cybermedia.

Though a reference is made to the offer document, neither the "Risk Factors" are mentioned in the covering letter not the hyperlink is directly leading to the offer document.

Considering that the e-mail is a legally recognized written invitation to the IPO, it would have been in accordance with the SEBI norms to

a) Indicate the Risk Factors

b) Link the offer document reference directly to the document itself. (eg: CyberMedia Offer Document (1.45 MB size).) Also the Sebi site did not contain the offer document on April 27th when the e-mail went into circulation. (See the SEBI site here)

It must be pointed out here that the Merchant Bankers to the issue namely Khandwala Securities Limited, do not appear to have considered the release of the e-mail as a violation of the SEBI norm.

A clarification has been sought from the Lead Managers to the issue as well as the Compliance officer on the issue and if received, would be made available here.

The objective of pointing out the apparent negligence here is to highlight the fact that Information Technology Act 2000 recognizes the e-mail as a written document. Though it is not digitally signed, it has the status of an invitation under the letter head of the Company.

It is also necessary to point out that the e-mail appends the scanned signature of the CEO of the Company which is amenable to be copied and mis-used, indicating the gross negligence of the Communication advisors and the IT security advisors of the Company.

When such IT savvy companies are themselves exhibiting such lack of due diligence in their operations, it is but natural that "Cyber Law Compliance" is still in its infancy in India.

It would be interesting to see how SEBI, the Lead Managers and the Compliance officer react to this.
 

Naavi

April,27, 2005

 

 

 

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