The Telegraph
Saturday , January 19 , 2013
Since 1st March, 1999
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Rejig in share sale rule

Mumbai, Jan. 18: The Securities and Exchange Board of India (Sebi) today relaxed rules governing its offer for sales (OFS) window — the mechanism created last year to help promoters bring down their stake in their listed companies to levels that ensure a public holding of at least 25 per cent.

The market regulator gave institutions the additional option of submitting bids for shares without having to stump up a 100 per cent upfront margin.

The number of OFS issues are expected to rise in the coming months as the deadline for compliance with the guideline on the minimum public holding in a listed company looms in June.

At its board meeting held today, Sebi decided to give two options to institutional investors participating in OFS. Under the first option, the institutions will be allowed to submit bids backed by a 100 per cent upfront margin, which will give them the right to modify or cancel their orders at a later stage. The settlement of funds and securities will be on T+1 (transaction date and one day) basis.

Under the second option that has now been introduced, institutions may place orders without the upfront margin. But they will not be allowed to modify or cancel these orders.

Market circles said the decision came after various institutions represented against the practice of 100 per cent upfront margin, saying that it posed a foreign currency risk.

At its board meeting today, the capital market regulator also relaxed the infrastructure debt fund (IDF) regulations. It widened the definition of strategic investors to include non-banking finance companies, foreign institutional investors in addition to other categories of investors.

Sebi, which has received two applications to set up an IDF, also ruled that these schemes would be allowed to invest up to 30 per cent of its assets under management in assets not below investment grade owned by sponsor/ associates, up from the earlier level of 20 per cent.