While the measures introduced by Sebi on Thursday may not see investors rushing to the capital markets, it?s nonetheless a good effort at making life easier for all stakeholders. So, companies that have been struggling to reduce their shareholding in order to comply with the required minimum float of 25% can now issue bonus or rights shares in addition to making institutional placements. Moreover, a QIP can now be made more palatable to investors with a 5% discount to the price based on the Sebi formula. In fact, the regulator has allowed companies to divest half of the mandatory 20% post-issue equity capital to PE funds, albeit with a three-year lock-in.
Small investors should be happy they will get at least some shares when they apply for an IPO. Mutual funds, too, should be pleased that the total expense ratio is fungible. Moreover, if they are able to attract subscriptions from smaller towns, they can spend an additional 30 basis points. Seeking out investors beyond the top 15 cities may seem like a tall ask right now but Sebi is doing the right thing in signalling to fund houses that they need to cater for small investors instead of simply chasing corporate surpluses as they have been doing all these years. In a bid to try and cut down the churn and encourage long-term investment, the regulator has stipulated that exit loads should be credited to a scheme rather than the AMC. Again, a larger base of distributors?Sebi plans to rope in postal agents, retired government and bank officials?and a simpler registration process will, over a period of time, help attract more savers. However, the commission structure for distributors, across financial products, perhaps needs to be looked at afresh with a view to both removing anomalies as also incentivising agents adequately. Perhaps the long-term policy for MFs will revisit entry loads.
