The Securities and Exchange Board of India (Sebi) has allowed company promoters to auction their stakes to investors instead of selling shares in public offerings and also approved changes in rules governing share buyback from promoters/ founders,paving the way for the government to meet the Rs 40,000 crore asset sale target for the fiscal year ending in March.
Introducing additional methods of fund raising Institutional Placement Programme (IPP) and Offer for Sale of Shares through the stock exchange for the purpose of complying with minimum public shareholding requirements Sebi said such offers would be made only to Qualified Institutional Buyers (QIBs). There would be a reservation of minimum 25 per cent to mutual funds and insurance companies. Issuer should announce an indicative floor price or price band at least one day prior to the opening of the offer, Sebi said after its board meeting on Tuesday.
According to analysts,the government could reduce the budget gap by selling shares of state-owned companies through open auction,while financial institutions may get better prices. Promoters will save on costs and hassles by avoiding public offerings. The government was forced to defer share sale of state-owned companies like ONGC,SAIL and IndianOil due to the volatile stock market scenario. The government had been planning to reduce its deficit via stake sale of public sector units. Many PSU shares like MMTC,STC,NMDC and Dredging Corp shot up on the bourses on Tuesday.
The offer can be either by way of fresh issue of capital or dilution by the promoters through an offer for sale. Using this method,public shareholding can be increased by 10 per cent or such lesser percentage as is required to comply with the minimum public shareholding requirement. There would be simultaneous filing of red herring prospectus with Sebi,Registrar of Companies and Stock Exchanges. There should be at least 10 allottees in every IPP issuance. No single investor should receive allotment for more than 25 per cent of the offer size, Sebi said.
Sebi said stock exchange would offer a separate window for the purpose of sale of shares through stock exchanges. The duration of this window would co- exist with the normal trading hours. The offer should be for at least 1 per cent of the paid-up capital of the company,subject to a minimum of Rs 25 crore. Offers would be permitted only for companies eligible to trade. However,promoters would not be eligible to bid for the shares.