Business Standard

Retail investors get more leeway in public offers

Related News

will soon be able to apply for more shares in public issues with the same amount of money. The Securities and Exchange Board of India (Sebi) has ruled that investors offered shares at a discount should be given the option of applying at the discounted price rather than the cut-off price.

In simple terms, if the price band in a public offer is Rs 100-200 and retail applicants are offered a 10 per cent discount, such investors can bid at Rs 180 (10 per cent discount at the upper end of the band). At present, investors can only select a cut-off price.

The new norm will help retail investors put in a larger bid with the same amount of money. For instance, retail investors can bid for a maximum of 1,000 shares if the upper end of the band is Rs 200. Under the new norms, they will be able to bid for 1,111 shares. The norm will apply to draft documents filed with the on or after June 15.

“Merchant bankers shall ensure that appropriate disclosures are given in the offer document/application forms to the effect that investors eligible for a discount can make payment after adjusting the discount, if any,” says the circular. For ease of calculation, it is preferable that the discount, if any, is stated in absolute rupee terms, subject to the maximum limit, it adds.

“It is a retail investor-friendly move,” said Prithvi Haldea of Prime Database. “It simplifies the entire issuance process.”

According to the circular, the current practice “takes away certain benefits from investors such as lower cash outflow at a price net of discount and the ability to apply for more shares with the same cash outlay”.

This assumes significance in the light of the government’s divestment programme, through which it intends to raise Rs 40,000 crore this financial year. The coming months will see the government dilute stakes in ONGC, and Hindustan Copper. It is also likely to offload a part of its equity in IOC, NBCC, MMTC and Rashtriya Ispat Nigam.

“It reduces work for entities involved in the issuance process,” said S Vishvanathan, MD & CEO, SBI Capital Markets. “There will also be operational advantages in terms of processing refunds.”

The move will help solve the refund problem, a bane for both bankers and registrars. If a retail investor is not applying through the Application Supported by Blocked Amount facility, a cheque for the excess amount has to be physically delivered at the applicant’s address. Quite often, applicants complain about delay in getting refunds.

Read more on:   
|
|
|
|
|

Read More

Nifty ends below 5,900, auto and financials weigh

Nifty ends below 5,900, auto and financials weigh

Quick Links

 

Market News

Raising the output key to Cairn India's prospects

With crude oil prices benign, increasing oil and gas production is crucial to drive growth

Biocon sees muted quarter, lacks immediate triggers

Reduced exports to West Asia & North Africa, capacity constraints affect sales

Exchanges plan stake sales in depository arms

NSE in talks with investors for offloading stake, BSE considering an IPO; to do so before April

Many listed firms had same auditors for over 10 yrs: IIAS

Proxy advisory body Institutional Investor Advisory Services India (IIAS) has called for periodic rotation of auditors and capping their tenure ...

Freeing diesel : Profound effect across many industries

The decontrol of diesel over the weekend will have a profound effect on the oil industry value chain. It could significantly reduce the fiscal ...

Back to Top