Bookbuilding For Entire Issue May Be Allowed

This would take bookbuilding down to the retail level and would radically change the manner in which equity issues are sold in the country.

The change would mean that the present limit of the bookbuilding portion, confined to only the firm allotment category and a maximum of 75 per cent of the issue, will be lifted and the entire issue would be allowed to be sold through the bookbuilding route.

This is expected to be a major shot in the arm for the issuers, since there would be a much more detailed exercise for selling the issue directly to the retail investor by the bookrunner.

 

Sebi executive director Vijay Ranjan told Business Standard: ``We are examining whether within the existing parameters some latitude can be given to companies to sell the entire issue through the bookbuilding route.''

The bookbuilding review is being looked at in detail by Sebi and it is expected to be taken up at the next board meeting.

Sebi had on June 27 already allowed pure debt issues over Rs 100 crore to be sold entirely through the bookbuilding process.

The aspect of whether a Rs 100-crore threshold limit is necessary for bookbuilding at all is also being looked at afresh.

According to Sebi, the Rs 100-crore bookbuilding threshold started off as an experiment and that could now be reviewed.

Sebi is clear that the bookbuilding effort can be taken to the retail investor, but the 25 per cent public holding norm would be retained.

Besides, the new Sebi norm of five shareholders for every Rs 1 lakh net offer to the public would also have to be adhered to. Moreover, the new proportionate allotment norms of Sebi, reserving 50 per cent of the public offer for the small investor applying for 1,000 shares or less, would also apply.

The critical aspect is that with the bookbuilding process now likely to be taken to the retail level, the brand strength of the merchant bankers would be tested to the hilt.

This is so since the retail-level investor would have to be wooed by the lead manager and bookrunner under the new regime.

Sebi would like the new changes, once they come into force, also to be tested by the

market.

The norms, the regulator feels, can always be fine-tuned according to the experience in the marketplace.

Sebi is working on a whole set of possible measures to revive confidence in the primary capital market.

The finance ministry is also concerned about the sagging market situation.