Sebi measures to curb price volatility after IPOsThe Securities and Exchange Board of India (Sebi) today announced a series of measures to boost investor confidence in the primary market and mutual funds and reduce transaction costs.
A Sebi board meeting held today allowed the introduction of anchor investors — a practice that is common abroad — under which a buyer can subscribe up to 30 per cent of the institutional investors’ quota in an initial public offering.
These investors will have to invest a minimum of Rs 10 crore and bring in 25 per cent of the margin on application and another 75 per cent within two days of the closure. The lock-in period for anchor investors will be 30 days.
The allotment to such investors will take place through competitive bidding a day before the public issue opens. No person related to promoters, the promoter group and book-running lead managers can apply.
A Sebi board meeting held today allowed the introduction of anchor investors — a practice that is common abroad — under which a buyer can subscribe up to 30 per cent of the institutional investors’ quota in an initial public offering.
These investors will have to invest a minimum of Rs 10 crore and bring in 25 per cent of the margin on application and another 75 per cent within two days of the closure. The lock-in period for anchor investors will be 30 days.
The allotment to such investors will take place through competitive bidding a day before the public issue opens. No person related to promoters, the promoter group and book-running lead managers can apply.
CREDIBLE AND CHEAPER
MOVE & IMPACT
* Anchor investors in IPOs — This will help bring high-quality investors by using discretionary quota. Lock-in will ensure less volatility when an issue is listed
* No superior voting rights in preferential and rights issues — This will prevent promoters from issuing to themselves shares that carry more than one per cent vote per share without offering minority shareholders a similar option
* No entry load for mutual fund investors — Investors can negotiate a lower rate with distributors
* Fee for market players reduced by 50% — Transaction costs go down; FIIs’ entry costs will be lower
By introducing anchor investors, the market regular wants to ensure 100 per cent payment within two days of the closure of the issue by institutional investors who are allotted shares on a discretionary basis.
“This is a good move and will help attract high-quality investors by using discretionary quota, and the lock-in will ensure less volatility on listing,” said Abhay Bhalerao, Director, Equirus capital.
In another significant decision, Sebi has removed the entry load on investors for current or new mutual fund schemes. Sebi Chairman C B Bhave told reporters here today that investors could pay the commission separately to distributors on mutual understanding, which can also be an advisory fees.
“However, the distributors will now have to disclose the commission they get from mutual funds whose schemes they are selling and also reveal how many other schemes they are distributing,” said Bhave.
The market regulator has also curbed the issue of shares with superior voting rights for both preferential and rights issues. Analysts said this would prevent promoters from issuing to themselves shares that carry more than one per cent vote per share without offering minority shareholders a similar option.
For example, the Bombay Stock Exchange recently declined to list shares with superior voting rights issued by Jagatjit Industries on grounds that there were no clear guidelines on the issue. However, it will not impact the differential voting rights shares that were issued by companies like the Tatas because those shares had inferior rights.
“Non-issuance of shares with superior voting rights means that companies cannot issue shares that have rights of more than one share. But it can issue a share that has a right of less than a share or a fraction of share. Thus the differential rights will continue,” said Somasekhar Sundaresan, partner at JSA, Advocates & Solicitors.
In another decision, Sebi said under the current guidelines, a shareholder can make an offer for sale of equity shares if he has held them for a period of at least one year. The board decided that if equity shares that are received on the conversion of fully paid compulsorily convertible securities, including depository receipts, are being offered for sale, the holding period of such convertible securities as well as that of resultant equity shares together would be taken into account for the purpose of eligibility.
The market regulator has also reduced the fees for market players by 50 per cent and more. For stock brokers, the fees have been brought down to Rs 10 per crore turnover (sale and purchase combined) from the earlier Rs 20 per crore. Similarly, in debt, the fees have been reduced from Rs 5 per crore to Rs 2.5 per crore.
The registration fees for foreign institutional investors (FIIs) have been halved from $10,000 to $5,000 and sub-accounts of FIIs, from $2,000 to $1,000.
For foreign venture capital, the application and registration fees are down from $5,000 and $20,000 to $2,500 and $10,000 respectively.
Further, Sebi made it mandatory for companies coming out with IPOs to list their stock in at least one stock exchange that has a nationwide presence of trading terminals, the idea being to ensure a liquid trading platform to investors.
Earlier this year, the regulator had amended rules for declaring the price band of initial public issues, reduced timeline for bonus issues and changed its rules on mandatory open offers in a drive to make the capital markets more investor-friendly.
“This is a good move and will help attract high-quality investors by using discretionary quota, and the lock-in will ensure less volatility on listing,” said Abhay Bhalerao, Director, Equirus capital.
In another significant decision, Sebi has removed the entry load on investors for current or new mutual fund schemes. Sebi Chairman C B Bhave told reporters here today that investors could pay the commission separately to distributors on mutual understanding, which can also be an advisory fees.
“However, the distributors will now have to disclose the commission they get from mutual funds whose schemes they are selling and also reveal how many other schemes they are distributing,” said Bhave.
The market regulator has also curbed the issue of shares with superior voting rights for both preferential and rights issues. Analysts said this would prevent promoters from issuing to themselves shares that carry more than one per cent vote per share without offering minority shareholders a similar option.
For example, the Bombay Stock Exchange recently declined to list shares with superior voting rights issued by Jagatjit Industries on grounds that there were no clear guidelines on the issue. However, it will not impact the differential voting rights shares that were issued by companies like the Tatas because those shares had inferior rights.
“Non-issuance of shares with superior voting rights means that companies cannot issue shares that have rights of more than one share. But it can issue a share that has a right of less than a share or a fraction of share. Thus the differential rights will continue,” said Somasekhar Sundaresan, partner at JSA, Advocates & Solicitors.
In another decision, Sebi said under the current guidelines, a shareholder can make an offer for sale of equity shares if he has held them for a period of at least one year. The board decided that if equity shares that are received on the conversion of fully paid compulsorily convertible securities, including depository receipts, are being offered for sale, the holding period of such convertible securities as well as that of resultant equity shares together would be taken into account for the purpose of eligibility.
The market regulator has also reduced the fees for market players by 50 per cent and more. For stock brokers, the fees have been brought down to Rs 10 per crore turnover (sale and purchase combined) from the earlier Rs 20 per crore. Similarly, in debt, the fees have been reduced from Rs 5 per crore to Rs 2.5 per crore.
The registration fees for foreign institutional investors (FIIs) have been halved from $10,000 to $5,000 and sub-accounts of FIIs, from $2,000 to $1,000.
For foreign venture capital, the application and registration fees are down from $5,000 and $20,000 to $2,500 and $10,000 respectively.
Further, Sebi made it mandatory for companies coming out with IPOs to list their stock in at least one stock exchange that has a nationwide presence of trading terminals, the idea being to ensure a liquid trading platform to investors.
Earlier this year, the regulator had amended rules for declaring the price band of initial public issues, reduced timeline for bonus issues and changed its rules on mandatory open offers in a drive to make the capital markets more investor-friendly.
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