Regulator Makes Sweeping Changes

Tags: SEBI, Securites and Exchange Board of India, ICDR,

The Securities and Exchange Board of India (Sebi) has amended Issue of Capital and Disclosure Requfrements (ICDR) Regulations, which will change the way qualified institutional bidders (QIBs) bid in follow-on public offers (FF0).

The revision. Issuers coming up with an FF0 can now allow QIBs to bid shares at any price above the floor price. The shares will be allotted on the basis of the pure auction method or a price priority basis, where the highest bidder will be given the priority. Retail investors, however, will get shares at the floor price.

To prevent any single entity from accumulating most of the shares on offer, Sebi has also given issuers an option to cap the number of shares or percentage of issue capital which a single bidder can bid. This will ensure wider distribution of issued capital. Until now, QIBs had to bid in a price range. The issue price or the cut-off price was decided based on the demand for the issue. The cut-off price was the maximum price at which all shares on offer were subscribed.

 The new practice is a win-win situation for both the institutional investors and the issuer. Says Prithvi Haldea. managing director. Prime Database: “Institutional nvestors will get the chance to bid at a higher price [beyond the price range] if they think it is correct. The company, in turn, will also get a higher valuation.”

The new practice will continue to exist with the older one. It could later be extended to initial public offers. Cap on employee allotment. Sebi has also capped the number of shares that can be allotted to the issuer company’s employees in a public issue.

The value of the shares issued to an employee under the employee reserved category cannot exceed Rs 1 lakh. Also, the total shares issued under the employee category should not exceed 5 per cent of the post-issue capital.

Strict disclosure. Companies will now have to disclose balance sheet items on a half-yearly basis, which will help the investors understand their interim position in a much better manner.