Sebi may alter delisting rule in board meet on Thursday

Norms for foreign participation in partly paid-up shares, budget estimates on agenda

The capital markets regulator, the Securities and Exchange Board of India (Sebi), is to have a meeting of its board of directors on Thursday.

On agenda in streamlining the rules for raising foreign capital through issue of partly-paid shares, besides decisions on the regulator;s annual Budget.

Partly-paid shares are an instrument through which companies can raise capital from investors where the amount is got in two parts. Unlike the normal practice in which the entire amount is paid upfront, the investor here only pays an upfront sum. When the remainder is paid after a certain period, the shares become fully paid ones.

AGENDA FOR BOARD MEETING

• Sebi might finalise norms for foreign participation in partly-paid shares
   
• Discussion paper had mentioned aligning rules with RBI norms
   
• Annual Budget under review
   
• Pay-rises could be discussed
   
• Market participants hoping for review of delisting rules
   
• Requirement for 25 per cent shareholder participation said to be a blow for delistings

Sebi issued a detailed discussion paper last month on this issue. It had proposed the rules be brought in line with Reserve Bank of India requirements. Pricing of such shares were to be determined upfront and 25 per cent of the capital to be paid at the beginning.

“…there is no specification as to the minimum amount to be paid with the application. To enable application by foreign investors and ensure uniformity with the RBI guidelines, the said regulation…may have to be amended to specify that in case of a part-payment option being provided by the issuer in a rights issue, this payment on application shall not be less than 25 per cent of the issue price,” the discussion paper had said.

The regulator is also likely to discuss the annual budget for the next financial year. A source suggested that a salary rise, which takes place every five years, is likely to be discussed.

The previous pay rise was in 2010. Proposals for the 2010 board meeting show the suggested rise at the time had ranged from 52 to 92 92 per cent.

Market participants will watch if the recent delisting norms would be open for review. Delisting is a process whereby a company whose shares can be bought and sold on stock exchanges buys these back from the public, making it no longer available for trading on the bourses.

The regulator’s new guidelines require 25 per cent of shareholders by number to tender their shares before a company can delist. Market participants had said this could make it difficult for delistings to go through.

Subsequently, Sebi chairman U K Sinha had hinted this provision might be re-examined, in his speech at the Association of Investment Bankers’ summit in December.

An email to Sebi did not get a reply.