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This is an archive article published on June 25, 2000

MFs, promoters lobbying hard to avoid preferential lock-in

JUNE 24: Mutual funds and big investors are lobbying overtime to get the one-year lock-in period on shares allotted through the preferenti...

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JUNE 24: Mutual funds and big investors are lobbying overtime to get the one-year lock-in period on shares allotted through the preferential issues. The Securities and Exchange Board of India (SEBI) move to put a lock-in period on preferential shares has upset the apple-cart of promoters and mutual funds who normally use preferential route to make a fast buck.

“For mutual funds and other institutions, preferential allotment is a big business. With the SEBI putting a lock-in, other retail investors can hope for some stability in share prices,” said an analyst. The earlier modus operandi of funds was: pick up shares from the preferential issue and then sell the shares when the prices are at high levels.

“These funds used to sell shares soon after the shares were issued, leaving other investors high and dry. Promoters also went along with mutual funds as they normally consider that their responsibility ends with just floating the issue,” said BSE dealer Pawan Dharnidharka. “SEBI should not succumb to pressure from mutual funds and promoters,” said another investor.

Preferential shares were easy money for mutual funds.

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