SEBI Eases Norms for IPO

In a bid to revive the primary market, SEBI (Securities and Exchange Board of India) eased norms related to the size of an IPO & pricing of preferential shares while allowing anchor investors to have a greater exposure to the offering. 

SEBI at its board meeting held has approved

* Proposal to allow bonus shares to be sold in IPO (Initial Public Offer) even if they have been issued within less than a year.           

* The SEBI board decided that all companies with a post - issue capital above Rs. 4,000 crore (Rs. 40 billion) are compulsorily required to offer at least 10% stake in the IPO. 

* In other IPOs, the minimum dilution to the public will be 25%, or Rs 400 crore, whichever is lower. 

"This will remove the anomaly that a company just short of Rs. 4,000 crore market capitalisation was required to dilute nearly Rs.1,000 crore (Rs 10 billion) while another company at Rs. 4,000 crore market capitalisation was required to dilute only Rs. 400 crore," the SEBI said in a release.           

* Companies that dilute less than 25% in an IPO will be given three years to comply with the minimum public shareholding norms, Sebi said.           

"In order to make regulatory requirements consistent across the companies irrespective of post-issue capitalisation and to facilitate mid-size issuers who may not be in need of large funds, SEBI has decided to take up the following proposal with the Ministry of Finance to carry out suitable amendments to SCRR (Securities Contracts (Regulation) Rules, 1957)," the regulator said.           

SEBI has also decided to increase the anchor investor's bucket to 60% from the current requirement of 30% of the institutional bucket.           

Moreover, the board approved the proposal "to permit bonus shares issued in last one year prior to filing of the draft offer document to be offered for sale, provided that these bonus shares were issued out of the free reserves or share premium".           

The market regulator SEBI has also agreed to replace the "closing price" norm with "volume weighted average price" in the pricing formula for preferential issues, among others.

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