Sebi chairman C.B. Bhave in Mumbai on Monday. (PTI)
Mumbai, Nov. 9: The Securities and Exchange Board of India has introduced a new form of book-building in follow-on public offers for qualified institutional buyers.
Under the new method, qualified institutional buyers will be free to bid for shares at any price above the floor price.
On the other hand, retail investors will get shares only at the floor price.
However, the rule is only for FPOs. Sebi was silent on whether it will be extended to initial public offers, but market circles do not rule out the possibility.
The decisions were announced after a Sebi board meeting today.
Besides the book-building stipulation, the regulator made listing easier for small and medium enterprises.
The regulator said it was not necessary for SMEs to have a separate exchange and allowed existing stock exchanges to have an SME platform.
Under the present system of book-building for both initial and follow-on public offers, the bidding for shares take place in a price band of 20 per cent.
Though the bids are at different prices within the band, there is only one final price.
In the new method, bidders can bid at any price above the floor price and get shares at different prices.
Sebi chairman C.B. Bhave said the new format was introduced after the market regulator received various requests for a pure auction.
He said bidding at any price above the floor price would only be limited to the QIB portion, with allotments made on a price priority basis and at differential prices. Price priority means those who offer to pay more will get preference in allotment.
The issuer can also place a cap on shares for a single entity, preventing the cornering of shares.
The regulator said SMEs would be exempted from the eligibility norms for initial and follow-on offers prescribed in the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009.
However, the board fixed a minimum IPO application size of Rs 1 lakh; the large sum should ensure the participation of only informed and financially sound investors.
For a listing on the SME platform, the upper limit of paid-up capital is Rs 25 crore. Sebi has set a minimum paid-up capital of Rs 10 crore for a listing on the main boards of the National Stock Exchange and the Bombay Stock Exchange.
The board said that an earlier order passed by a panel against National Securities Depository Ltd on IPO irregularities was null and void. It also decided to make public the order.
In another significant decision, Sebi made it mandatory for listed companies to come out with half-yearly disclosures of balance sheets, audited or unaudited. This has been done taking note that internationally most jurisdictions require disclosure of balance sheet items on an interim basis, Bhave said.
On a quota for each employee in public issues, Bhave said it had been decided to put a ceiling of Rs 1 lakh. Currently, there is no ceiling, but employees as a group can be allotted shares up to 10 per cent of the issue size. Sebi has changed this norm to 5 per cent of post-issue capital.
Meanwhile, expectations of more reforms and strong global cues have pushed the sensex up by 340 points to 16498.72 points at the end of trading today.
At A Glance
Introduction of pure auction as an additional book building mechanism in follow-on public offerings. QIP bidders can bid at any price above floor price. Retail investors to be allotted shares at the floor price
Eligibility norm for share issue relaxed for SMEs
Minimum IPO application size for SME issue is Rs 1 lakh
Upper limit is Rs 25 crore for listing on the SME platform
Listed SMEs can submit financial results on half-yearly basis instead of quarterly
An employee can buy maximum Rs 1 lakh of shares
Market cap for FPOs lowered to Rs 5,000 from Rs 10,000