December 2012

The Securities and Exchange Board of India (SEBI), in a move to increase the participation of retail investors, modified the share allotment system, irrespective of his application size. It ensures every retail applicant gets allotted a minimum bid lot, subject to availability of shares in aggregate. The system will satisfy more number of smaller applicants in the oversubscribed issues. The minimum application size for all investors is also being increased to Rs.10,000 -15,000, as against the existing Rs.5,000-7,000.

To encourage professionals and technically qualified entrepreneurs who are unable to meet the requisite 20 per cent contribution by themselves as promoters they will be allowed to meet the same with the contribution of SEBI-registered Alternative Investment Funds such as SME Funds, Infrastructure Funds, PE funds and VCFs, subject to a cap of 10 per cent. SEBI also said that it would permit additional routes, including rights and bonus issue, to facilitate companies to reach minimum public shareholding requirements. To allow more flexibility to the issuers, changes up to 20 per cent in the amount proposed to be raised as given in the objects of the issue at the red-herring prospectus (RHP) stage, as against the existing 10 per cent, will not necessitate re-filing with SEBI. To facilitate qualified institutional placements (QIPs) even in a falling market, issuers will be allowed to offer a maximum discount of 5 per cent to the price calculated as per the SEBI regulations.

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