Sebi amends OFS norms, mulls safety net for IPOs

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Securities and exchanges board of India (Sebi) has made changes in the offer for sale (OFS) norms to help companies achieve the minimum public shareholding before the deadline in June. Sebi is also in the process of bringing in safety net mechanism for initial public offerings (IPOs) to safeguard the interests of small retail investors.

Sebi in its board meeting in Chennai on Friday found that OFS was a very useful mechanism for promoters to offload shares in order to achieve minimum public shareholding. Institutions can place orders without upfront margin in line with secondary market practice, but bids cannot be modified or cancelled except upward revision in price or quantity. Institutions placing bids with 100 per cent upfront margin can however, cancel or modify the bids.

“The earlier requirement of 25 per cent margin is removed as part of clearing the bottlenecks in the OFS mechanism, which along with other avenues like preferential allotment has become very useful in achieving the minimum public shareholding limit. This is the second time OFS norms are being amended. Sebi has been issuing statement and is also engaging in discussions with companies to help them achieve the limit before the deadline. However, companies which do not comply with the Sebi regulations will have to face the consequences,” said U K Sinha, chairman, Sebi.

The discussions were on over introducing safety net provision for IPOs, said Sinha without elaborating. As per the proposal, companies making initial public offers would probably be asked to refund the money to small retail Indian investors if the price of the shares plunge by more than 20 per cent within three months of listing.

Amending the regulations with regard to infrastructure debt funds (IDFs), Sebi allowed AMCs to invest funds received as pre-payment of principal or regular repayments of principal in bonds of public financial institutions and infrastructure finance companies, if they are unable to find core assets. The tenure of the scheme also has been extended to two more years.

Sebi also effected amendments in the stockbroker and sub-broker regulations, 1992 to ensure participation of banks and other institutional participants in the proposed debt segment on stock exchanges. The segment intends to develop the corporate bond market and encourage trading on stock exchanges.

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