Sebi Fiat On Share Buyback Unlikely To Woo Investors

This is because Sebi has asked these companies to only publish an advertisement annoucing the buy-back facility in a regional newspaper and an English national daily. It has not asked these companies to send individual letters to the shareholders of these companies.

Around 60 companies had appealed to Sebi against the BSE listing denial for non-compliance with the minimum shareholding norm on the ground that no such norm existed when they tapped the capital market.

While Sebi reversed BSE's decision in many cases after hearing each company on a case-to-case basis, in around 9 cases Sebi order appointment of agencies offering buy-back facility. A letter setting terms and conditions for buyback arrangement was sent to these companies recently.

An official with a leading merchant banker told Business Standard: Many investors will not even notice these advertisements and thus would be deprived of the opportunity of unloading the stock.

Also, Sebi does not specify at what price the shares will be bought back. However, BSE has apparently told these companies that shares would be bought back at the issue price. Sebi letter has left the crucial question of networth of the agency doing the buy-back to the exchanges.

BSE sources say that the exchange has set the net worth requirement double the size of the issue. According to terms set by Sebi, the agency will provide buyback facility to all the original investors for 3 months from the date of listing on the exchange and there will be no upper ceiling on the buy-back quantum either per investor or in aggregate.

While Sebi had upheld the appeals of these companies, it found that a large part of the shareholding is concentrated in the hand of few allotees, and therefore the original investors should be given an exit route in the form of buy-back facility.