Institutions must pay 100 pc for IPO applications

There were complaints from many quarters that some QIBs were using the loophole of lower margin money to boost certain IPOs and lure small investors. Several issues were oversubscribed several times over within minutes,if not seconds,of the issue opening for subscription. Some of the merchant bankers had reduced the book-building norm to mere mockery by arranging bids at the cut-off level and getting the issue filled up within seconds of its opening for subscription.

However,according to a school of thought asking QIBs to pay margin money does not make sense since there are just about 200-300 custodians in Mumbai and once allotment is decided,money can be collected in no time. The interest of FIIs in Indian IPOs could come down in view of this stipulation. Its also true that theres no rationale in asking QIBs to pay only 10 per cent while taking 100 per cent from retail investors. Besides,the time-frame for IPO mobilisation and listing on the exchanges has come down, said a banker. The Sebi board,which met here on Saturday,also decided that the reservation for employees in public/rights issues would be available to employees of subsidiaries and material associates of the issuer whose financial statements are consolidated with the issuers financial statements. This will enable issuers to enable a wider participation un the employees quota which normally remains undersubscribed.

In another move,the Sebi board has decided to allow physical delivery in the derivatives segment but no timeline has been fixed for this. The Sebi board has decided to allow physical delivery in the derivatives segment. There has been a demand for this for some time now and the board felt that there was some substance in this, Bhave said.

Sebi will discuss with the stock exchanges and institute an appropriate mechanism for physical delivery in the derivatives market,he said. This would be discussed with the stock exchanges and an appropriate mechanism for physical delivery in derivatives would be evolved. There will be a need for proper risk-containment systems, he added. Long-term contracts in derivatives,now only for three years,would be possible for five years,he said. The board felt the time is right and we have seen volumes build up there. Long-term contracts up to five years will also be possible, he said.

It has also allowed stock exchanges to introduce derivative contracts on volatility indexes which have a suitable track record. On book building,the Sebi chief said that the choice remained with issuers whether to adopt the French auction route for their issuances or not. It French auction is not prescribed by the Sebi, he said.