Market regulator Sebi is reportedly working towards a series of important steps which would impact fresh issue of shares in the stock market. These include tweaking the pricing norms of qualified institutional placement(QIP), introducing the concept of an ‘anchor investor’ during
the public float of a company as also easing disclosure norms while making a rights issue.
The most significant of these measures could be the anchor investor concept at the time of IPO. The proposal which was discussed at a meeting of the Primary Market Advisory Committee of Sebi on Monday, would allow a strategic investor to pick as much as 25% of the total
shares reserved for institutional investors during an IPO, according to a report
in the Economic Times.
As of now, of the total shares at issue during an IPO, 60% is reserved for institutional investors. So for instance if a company is diluting 25% equity, 15% is the portion is meant for institutional players. If the proposal is implemented a single investor can buy as much as 3.75%(or 6.25% depending on how the calculation is done) during the IPO. This could even open an opportunity for private equity and venture capital investors to participate during the IPO instead of the
pre IPO placements, many of which takes place just weeks before the issue at the IPO.
This anchor investor, who cannot be related to the promoter or the promoter-group companies, will however face a lock-in of three months.
SPEED UP ISSUES
Sebi is also looking to cut down the timeline for IPOs from the time the issue opens till the shares get listed from 21 days currently to 15 days. Also under discussion are plans to simplify the existing IPO application form, making it easier for market intermediaries to process the data, once the issue closes for subscription.
The market regulator is also working on minimum disclosures for rights issues. All that a company may now be required to provide is the reason for raising funds.
Sebi is also looking at making the issue price of QIPs closer to the market price. As of now, QIP pricing is based on the two-week average of the firm’s stock price. This may be brought down to one week or ten days moving closer to the global practices by reducing the gap between the market price and the issue price of stocks in such an issue. This however, runs the risk of punters, some large institutional investors or even companies themselves manipulating the stock prices to suit their requirement.
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