Business standard updates *Sebi to tweak IPO norms to boost retail participation* BS REPORTER Mumbai, 4 June The Securities and Exchange Board of India ( Sebi) is likely to announce a series of changes to the initial public offering (IPO) framework, to help issuers and boost investor participation. Among the changes planned are removal of the ₹ 4,000- crore minimum size criterion and an enhanced quota for the socalled anchor investors. The tweaks to the IPO framework are being planned at a time when a slew of companies are gearing up to hit the market for raising capital. The announcements, sources indicated, were expected to be made at Sebi’s next board meeting on June 16. Under the current regulation, a company has to divest at least 25 per cent of its stake if its valuation is below ₹ 4,000 crore. But large companies — those with market capitalisation of more than ₹ 4,000 crore — need to divest only 10 per cent in public issues. Sebi Chairman UK Sinha on Wednesday said the regulator was reconsidering the rule because it was proving an incentive for companies to artificially beef up their valuations so that they were allowed to sell fewer shares in IPOs. “A company with a valuation of, say ₹ 3,500 crore, ends up issuing more shares. So, companies present before under ₹ 4,000 crore. Bankers Sebi is also planning to raise issues to boost institutional investors’ participation and provide retail ones more comfort. Anchor investors are those institutions that invest in IPOs days before their opening date and have their investments locked in for a period of 30 days from the date of allotment. Sebi had introduced the concept of anchor investors in 2009 to encourage investors to commit capital in IPOs even before their opening, so that positive signals could be sent out. At present, anchor investors can be allotted up to 15 per cent of the shares offered in an issue. Without specifying the new cap, Sinha said the rise in quota for anchor investors would be carved out from the institutional investors’ share, to ensure the retail investors’ quota wasn’t affected. In an IPO, 50 per cent shares are meant for institutional investors, while the quota for retail investors is 35 per cent. The remaining 15 per cent shares are for high- networth individuals. THE SMART INVESTOR II, 1 > >Quota for retail investor likely in offers for sale “A company with a valuation of, say ~3,500 crore, ends up issuing more shares. So, companies present before Sebi that their value is ~ 4,000 crore or more. Such discrimination is creating an anomaly and we are trying to resolve that” UK SINHA Sebi chairman ( On the sidelines of the CII Capital Markets Summit) *Retail investor quota in offers for sale likely* JAYSHREE PYASI Mumbai, 4 June The Securities and Exchange Board of India (Sebi) is planning a major fillip to the Offer For Sale (OFS) route, predominantly used by promoters to divest their stakes to comply with the minimum public shareholding (MPS) requirement. According to sources, the market regulator will soon make large- scale changes to the OFS framework, such as allowing non- promoter shareholders to use the route and a quota for retail investors. Introduced in 2012, the OFS route is a fast- track share sale mechanism, where a shareholder can divest his shares on the stock exchange platform during market hours. The route has proved widely popular with companies wanting to bring down their promoter holding to comply with the 25 per cent MPS requirement. Following the success, Sebi plans to extend this method to institutional shareholders with holding of more than five per cent. Brokers said the OFS route was more transparent and offered better price discovery over other share sale mechanisms such as block deals or even follow- on public offerings. For instance, in 2012, Citigroup had sold nearly 10 per cent stake worth a little over $ 2 billion in HDFC through block transactions, leading to a sharp fall in the housing loan provider’s share price. Those in the sector say such large block transactions can take place through the OFS route instead. Sources said changes to the OFS framework had been deliberated at Sebi’s secondary market advisory committee ( SMAC) meetings and was likely to be taken up by the Sebi board soon. Lack of retail participation in share sales done through OFS was a major issue discussed at the SMAC meeting, a source said. “ Sebi wants earmarking of shares for retail investors in OFS. Also, provisions to allow discount to retail investors, if the need arises,” said a source. Confirming part of the development, U K Sinha, chairman, Sebi, said on Wednesday, “We are working on guidelines through which institutional investors which are not promoters but have a significant holding in a company might be able to access the OFS route.” Sinha, speaking on the sidelines of a CII capital markets summit, said Sebi was also considering allowing more companies to tap the OFS route. At present, only the top 100 companies by market capitalisation are allowed to sell shares through this route. Other companies that can access the route are those wanting to pare promoter holding to comply with the MPS norms. BSE had sent a representation to Sebi last month to allow companies to sell stake via OFS route. “Private equity players, venture capital funds and other domestic investors will be able to reduce their stake and get a quick exit from a company,” said Prithvi Haldea, chairman, Prime Database. Prime Database says India Inc has raised equity capital worth at least ₹ 50,000 crore in the previous two financial years, a large portion of it via the OFS route. Wider ambit may allow institutional shareholders to use the route [1]Sebi will soon make large- scale changes to the offer- for- sale ( OFS) framework, such as allowing non- promoter shareholders to use the route and a quota for retail investors [1]OFS is predominantly used by promoters to divest their stakes to comply with the minimum public shareholding norm [1]Introduced in 2012, the OFS route is a fast- track share sale mechanism OPENING NEW DOORS -- A.Rengarajan Company Secretary Chennai 93810 11200 “Positive belief in yourself will give you the energy needed to conquer the world and this belief is the power behind all creation.” ― Stephen Richards , *Think Your way to Success: Let Your Dreams Run Free* CS Benevolent Fund is a collective effort towards extending the much needed financial support to the community of Company Secretaries in times of distress Let us lend support and join for noble cause. 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Posted on: Thu, 05 Jun 2014 00:18:12 +0000
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