Sebi hikes retail investment cap in IPO to Rs 2 lakh

In the face of flooding of IPOs, market regulator the Securities and Exchange Board of India (Sebi) today doubled the limit for retail investors to Rs 2 lakh and tightened the norms for firms to guard against unnatural hyping of the issues.

At the same time, it paved the way for much-demanded public offering by insurance companies by issuing disclosure and accounting norms.

Sebi Chairman C B Bhave addressed issues ranging from abuse of issuance of preferential share norms in favour of promoters to role of media and agencies generating coverage for the public issues where risk factors are virtually hidden.

He, however, said that some more time would be needed to revamp the norms for acquisition of listed firms.

"The board decided that the maximum application size for retail individual investors may be increased to Rs 2 lakh across all issues," Bhave said.

The market regulator also asked the companies coming out with IPOs to come clean on their media coverage in the run-up to the public issue by making adequate disclosures with the regulator and investors about all the news reports.

The provision is to ensure that the information appearing in media is consistent with the disclosures made in the public offer document.

"The board decided that the merchant bankers may submit a compliance certificate as to whether the contents of the news reports that appear after filing of draft offer document are supported by disclosures in the offer document or not," Bhave said.

The Sebi also asked the companies to announce a fixed date for payment of dividend and issue of bonus shares for the benefit of investors.

While clearing the much-awaited norms for insurance IPOs, it also paved way for rights shares issuances for companies listed in India through Indian Depository Receipts (IDRs).

"In order to ensure  uniform treatment for all classes of investors in rights issues, the Board decided that only one payment option may be given by the issuer to all the investors i.e. Either (i) part payment on application with balance money to be paid in calls or (ii) full payment on application.

"The board also decided that where the issuer opts for part payment, it shall be incumbent on them to obtain approvals, if any, as may be necessary for the purpose," he said.