IPO: Investor quota up at 35%

Sebi issued a circular on Tuesday with respect to these changes to effect amendments in its DIP guidelines. The change with respect to enhancing the allocation category for RIIs will come into force for all IPOs for which the draft offer document is filed after April 4, 2005 and will be limited to the book-built issue.

The reservation is not required in the fixed price issue, as there are hardly any institutional buyers interested in subscribing to the issue, market analysts said.

At present in a book-built issue allocation to RIIs, non-institutional investors (NIIs) and Qualified institutional buyers (QIBs) is in the ratio of 25:25:50, respectively. Sebi has now decided to increase the allocation to RIIs from 25 to 35 per cent and correspondingly reduce the allocation to NIIs from 25 per cent to 15 per cent. In case where the allocation for QIBs is 60 per cent mandatory, RIIs will be allotted 30 per cent and NIIs will be given 10 per cent.

T. Ramaswamy, CEO AMBI and member, Sebi committee on Disclosures said: ‘‘This is probably because the tremendous growth the retail investor base has shown. However, if maximum limit for retail investor has been doubled, shouldn’t something similar be considered for the minimum investment, thus directing those below the limit to come through mutual fund route.’’

Sebi has also decided to reduce the bidding period of 10 days which is in force currently for book-built issues. This period is extendable for another three days if there is a revision in price band. It has now been decided to cut the bidding period from five-10 days to three to seven working days. The existing guidelines require all issuers (whether listed or unlisted), making a public issue through book-building process to disclose the price band/floor price in the Red Herring Prospectus /application form.