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Fast forward on public offer road

New Delhi, Nov. 15: The Securities and Exchange Board of India (Sebi) will come out with easier norms for public issues and a more relaxed set of rules for companies that wish to pull their shares off stock exchanges.

The announcement to this effect came from chairman M. Damodaran, who told a conference here that no majority holding by a single strategic investor would be allowed in a bourse, which should have diverse shareholdings to make sure it is run professionally.

“An exchange is the first-level regulator. If it is owned by an entity which it also regulates, it will throw up questions,” Damodaran said in response to a query from a bourse on offering 51 per cent to a strategic investor.

Under Sebi norms, exchanges must demutualise and corporatise themselves to avoid conflicts of interest between the owners and market participants.

“If the participant becomes the owner of a bourse, there is a chance that the promoter will influence policy in its favour.”

Damodaran, however, said corporatised bourses were free to tap the market for funds to carry out expansion. “If an exchange needs capital, it can tap the market. It will ensure higher transparency. But first, it must have a plan. We will examine all options,” he added.

The Sebi chief also announced a “separate window” on the terminals and BSE and NSE for block deals in a process that aims to make such transactions more transparent.

“Block deals can now take place only from 9.55 am to 10.25 am, along with the normal trading,” he said.

National Stock Exchange (NSE) CEO Ravi Narain, who also spoke at the conference with Damodaran, said the Sebi move would reduce intra-day volatility on bourses triggered by block deals. The system kicked off from Monday.

“Block deals often disrupt the market through a sudden rise and fall in share prices,” Narain said. He said the new window will also be transparent since it will throw up the names of buyers and sellers beyond a limit.

On delisting, Damodaran said easier exit rules were on the way and would be announced shortly, though he refused to say how soon the process would be completed. At the same time, he indicated that a higher degree of market surveillance would be mounted in the days ahead.

“The integrated market surveillance system should be in place by March 2006. We are also trying to come up with new norms for follow-on public offers by this year. This would bring down the time and cost of offers,” he added.

On short-selling of securities by institutions, he said a decision is expected to be taken by March. The role of participatory notes has been a major issue of debate in recent times, with questions being raised about dubious money coming into India through this route. Asked if Sebi was looking into this, Damodaran said “everyone would like to know the entities that are active in the market”.

Head of Nasdaq International, Charlotte Crosswell, said the US bourse was in talks with Indian firms of “all sizes and sectors” that are already listed or plan to. “Many Indian companies are now well-positioned for domestic and international IPOs. A lot is happening in India,” she added.

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