Infrastructure issue norms relaxed

MUMBAI, Sept 7: The Securities and Exchange Board of India SEBI has granted specific relaxations to public issues by infrastructure com...

MUMBAI, Sept 7: The Securities and Exchange Board of India SEBI has granted specific relaxations to public issues by infrastructure companies provided the projects are appraised by any developmental financial institution dfi or Infrastructure Development Finance Corporation IDFC or Infrastructure Leasing amp; Financial Services ILFS. Sebi has decided to make it mandatory on companies to make all fresh share allotments through the public issue route to investors in dematerialised form only.

The regulator also sought to reduce the cost of public issues through compulsory demat mode, allow 100 per cent book building for issues above Rs 25 crore and reduce the number of mandatory collection centres.

Sebi chairman D R Mehta said primary issues would have to be compulsorily made through the depository mode after a specified date as recommended by the informal group on primary markets chaired by Shankar Acharya. The diktat is expected to come into effect from November this year. Shareholders will, however, be allowed to rematerialise their securities free of cost if they are desirous of keeping their shares in a physical form only.

Mehta said the regulator would reduce the minimum number of collection centres to the four metros and where the regional stock exchange is situated for issues above Rs 10 crore. The board decided to request the Reserve Bank of India to extend line of credit to market intermediaries, he said.

Infrastructure projects must have a participation of at least five per cent of the project cost by the appraising institution thereby enabling exemption from making a minimum public offer of 25 per cent of its securities and minimum subscription of 90 per cent provided alternate source of funding, in case of under subscription, is disclosed. The regulator also waived the requirement of five shareholders for Rs one lakh of offer in case of offerings by infrastructure companies.

It was also decided that these companies should be permitted to freely price the offerings in the domestic market provided the promoter along with equipment suppliers and other strategic investors subscribe to 50 per cent of equity at the same or higher price than that offered to the public.

Stating that the companies would be allowed to keep their issues open for 21 days, Mehta added such companies would also not be required to create and maintain a debenture redemption reserve DRR in case of debenture issues.

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On the Acharya committee report, Mehta said the board desired that the concept of domestic depository receipt may be examined by the regulator along with using secondary market infrastructure for marketing of primary issues as well as permit application for new issues in newspapers subject to legal provisions. The board decided that SEBI may constitute a committee in consultation with the RBI to develop debt trading.

On the suggestion for buyback of shares by corporates, the board decided to recommend the proposal again to the government. The board has suggested that Sebi should make efforts to extend trading terminals to at least 1000 cities by the year 2000.

On collective investment schemes CIS, Mehta said Sebi has formulated a plan to realise monies locked up in such schemes and added that the S A Dave committee report was almost ready and would be finalised by next week. A sub-committee had been formed to look into the accounting part, which is yet to submit its recommendations. The total number of companies running such schemes from whom Sebi has received information numbered 592 with amount mobilised to the tune of Rs 2365 crore.

On derivatives trading, he said Sebi was awaiting amendment to the Securities Contracts Regulations Act SCRA by the government while it has already asked the National Stock Exchange to go ahead with preliminary steps.

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