For the Securities and Exchange Board of India (Sebi), 2012 will always be remembered as the year of reforms and reviews. The capital market watchdog reviewed the fundraising avenues to act as a perfect enabler for the government’s divestment programme besides amending various regulations to bring in more transparency along with checks & balances.
The year started on a high with Sebi approving introduction of offer for sale (OFS) and institutional placement programme (IPP) to help the government meet its divestment target of R40,000 crore for FY12. Though the government fell short of its target in the last financial year, it is currently reaping the benefits of the OFS route having raised more than R6,500 crore through two transactions and lining up many more.
Interestingly, second half of the year also saw the regulator relax provisions related to payment of margins and cooling period for the OFS and IPP route based on feedback received from various market participants. Sebi also eased the norms for insurance companies and mutual funds to participate in preferential allotment, thus, paving way for LIC picking up further stake in many state-owned banks.
Start of the year also saw Sebi bringing in restrictions in the manner one could trade in stocks on the listing day. While circuit filters were introduced to curb sharp movements in the stock price, day trading was banned to keep away traders and speculators. The result was a notable reduction in the wild swings that shares saw on the day of listing.
The primary market process were also in for some major review with the twin objectives of getting more retail investors in the market and removing any form of avoidable bottlenecks. So, while retail investors were provided assured allotment in an initial public offer (IPO), the nationwide network of stock exchanges was used to increase the penetration level of public issues.
Merchant banking fraternity was also directed to disclose their track record while managing IPOs to make them more accountable for the pricing of the issue and price movement post-listing. Though bankers resisted the move, the regulator made it clear that it was no mood to budge on this.
Sebi tried to put in further checks on the bankers by introducing a concept of ‘safety net’ in all IPOs wherein issuers will have to buy back shares from retail investors if the price falls beyond 20% in the first three months of listing. The ‘safety net’