Norms for action against cos not adhering to minimum public shareholding regulation on cards too
The Securities and Exchange Board of India (Sebi) will review some of the margin and disclosure requirements related to offer for sale (OFS) when its board meets on January 18. The regulator will also announce norms for action against companies that do not comply with the minimum public shareholding regulations.
According to sources, Sebi has decided to review the OFS norms based on feedback received from various market participants, including merchant bankers and even stock exchanges. The changes are aimed at bringing in more transparency and flexibility in the OFS bidding mechanism.
Sources further add that Sebi might reduce the up-front margin requirements to near-zero while putting the onus of trade guarantee on the bourses. In June last year, Sebi allowed stock exchanges to decide on an ad-hoc margin requirement for OFS applicants. Prior to that, the norms required 100% up-front payment in an OFS.
Sebi chairman UK Sinha had recently said that the market has been demanding various changes in the OFS mechanism, including change in timing and margin requirements. It is, however, believed, that lower margin requirements would be accompanied with tighter checks and balances.
?There is no end to such demands. Asking for new changes just for the sake of it is not good enough? However, if the situation so demands, we will look at timing, margins and any other changes. I am sure nobody will be happy if the margin requirements are removed and the trades are not honoured,? he had said on the sidelines of an investor conference.
Another important change in the OFS mechanism, which Sebi is mulling, relates to the disclosure of the bidding details. Currently, only the cumulative demand of shares is disclosed, which, according to market players, does not reflect the true picture.
?We have suggested to Sebi that data related to bid quantity should be disclosed with the price points as well to give more clarity to all investors,? said a banker wishing not to be named. ?It should be on the lines of the IPO bidding data where we know at what price the bids have come,? he added.
The regulator is also expected to announce the list of possible action against companies and promoters that fail to comply with the minimum public shareholding norms. Sources say Sebi might bar non-compliant companies and its promoters from capital raising besides including such companies in the trade-to-trade segment where non-delivery transactions are not allowed.
According to the minimum public shareholding norms, promoters of all listed companies have to bring down their stake to 75% by 2013. The deadline for private companies is June 2013, while that for PSUs is August 2013. The regulator is also likely to announce the final framework for ‘safety net’ mechanism in IPOs, which is aimed at bringing in more discipline in pricing of offers by merchant bankers. Sinha has already said that Sebi wants to use the mechanism only in a ?mild manner? so that it is not looked upon as another hindrance in the IPO process.
