Regulator gives fund raisers more flexibility

Giving more flexibility to fund raisers in the capital market,the Securities and Exchange Board of India Sebi on Monday...

Giving more flexibility to fund raisers in the capital market,the Securities and Exchange Board of India Sebi on Monday introduced pure auction as an additional book building mechanism and relaxed certain requirements of fast-track issues. In a bid to boost transparency,it also asked listed companies to disclose balance sheets every six months and tweaked the rules relating to employees quota in share offerings.

Introducing the pure auction system,Sebi said that for follow-on public offers FPOs,bidders would initially be free to bid at any price above the floor price and allotment would be on price-priority basis and at differential prices. However,in such cases,retail individual investors would be allotted shares at the floor price. If the issuer desires to place a cap either in terms of number of shares or percentage to issued capital,this may be permitted so that a single bidder does not garner all shares on offer, Sebi chairman CB Bhave said after a board meeting here on Monday.

In the case of fast-track issues,it reduced the average market capitalisation of public shareholding of the issuer to Rs 5,000 crore from Rs 10,000 crore and pegged the annualised trading turnover to free float for companies whose public shareholding is less than 15 per cent of the issued capital. It also allowed flexibility in case the clause relating to composition of board of directors has not been complied with in one or more quarters.

In another important decision,Bhave said listed companies will disclose their balance sheet every six months. Taking note that internationally most jurisdictions require disclosure of balance sheet items on an interim basis whereas in India companies disclose only interim financial results,the board decided to mandate half-yearly disclosure of balance sheet items with audited figures or un-audited figures with limited review, Sebi said.

In another decision pertaining to reservation for employees in allotment of shares,the board decided to put a ceiling of Rs 1 lakh on the value of allotment that can be made to an employee under employee reservation category and to permit reservation up to 5 per cent of the post issued capital instead of 10 per cent of issue size.

Sebi also brought down the timelines for submission of financial results by listed entities. Currently,there are varying time limes for disclosure of unaudited/ audited/ limited review results. The board decided to make it mandatory to disclose only limited review or audited results within 45 days of the end of the quarter. It cut the timeline for disclosure of audited annual results from 90 days to 60 days to those companies which opt to submit their annual audited results on a stand-alone basis in lieu of the last quarter un-audited financial results.

SME trading platform on bourses

MUMBAI: Sebi on Monday ruled out the possibility of a separate exchange for small and medium enterprises SMEs in the country but allowed a separate trading platform in existing exchanges and relaxed norms for listing of SME shares. In order to ensure that only well-informed and financially sound investors participate in the initial public offer IPO of SMEs,a minimum IPO application size of Rs 1 lakh has been prescribed. Sebi chairman CB Bhave said the SME exchange platform could be on existing exchanges. Bhave had,in the past,said that the regulator was considering the possibility of a separate SME exchange.

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Sebi has capped the paid-up capital at Rs 25 crore for a company to be listed on the SME platform and a minimum paid up capital of Rs 10 crore has been prescribed for listing on the main boards of NSE and BSE. Sebi said that merchant bankers bringing out IPOs of SMEs would be required to ensure that the issues are fully underwritten. However,only a minimum percentage 15 per cent of the issue size will be mandated to be compulsorily underwritten by the merchant banker itself.

Companies listed on the SME platform should compulsorily migrate to an equity segment main board on exceeding the Rs 25 crore post-issue paid up capital limit. Further,if follow on offer or rights issue results in triggering of the Rs 25 crore limit then the company would have to migrate to the main board. Sebi said that SMEs will be permitted to declare their results every half year,as opposed to every quarter in normal cases. ENS