Financial Daily from THE HINDU group of publications
Sunday, Dec 14, 2003
Financial Daily from THE HINDU group of publications Sunday, Dec 14, 2003 |
|
|
|
|
|
Markets
-
Preferential Allotments Preferential allotment — SEBI plans curbs on promoters selling equity Our Bureau
Mumbai , Dec. 13 IN an effort to plug a loophole in preferential allotment guidelines, a SEBI panel has proposed to ban promoters selling from their equity holding six months before and after they make a preferential allotment of equity shares to themselves. A lock-in period of one year already exists on preferentially allotted equity shares. The Primary Market Advisory Committee (PMAC) of the capital market regulator that met on December 1 said the measure might be necessary to stop promoters enriching themselves at the cost of fellow shareholders. Recently, promoters of Pantaloon Retail, Jain Irrigation and Television-18 had sold part of their holdings in the open market, while simultaneously issuing equity shares to themselves through the preferential route at a discount to the market price. "Of late, some instances of misuse of preferential allotment route by promoters to enrich themselves at the cost of other shareholders, have come to the notice of the SEBI. Apparently, promoters are taking advantage of (the) bull run by offloading shares at ruling market prices (which are much higher) and going in for preferential allotment at minimum price as per the formula given in SEBI (DIP) Guidelines (which are lower than current market prices). "As such, promoters are profiteering from the bull-run and are also in a position to maintain their stake through preferential allotments to themselves," SEBI said calling for comments and suggestions from the public on the issue. The PMAC has suggested that promoters' entire stake should be in demat form for stock exchanges to effectively ensure the freeze on sale before and after the allotments. It has, however, proposed to exempt preferential allotments under the corporate debt restructuring (CDR) mechanism of lenders. CDR is a three-tier debt revamp mechanism of banks and financial institutions that helps companies facing difficulties, restructure their finances through mutually agreed packages, which may include equity infusion from promoters.
Article E-Mail :: Comment :: Syndication
|
Stories in this Section |
|
The Hindu Group: Home | About Us | Copyright | Archives | Contacts | Subscription Group Sites: The Hindu | Business Line | The Sportstar | Frontline | The Hindu eBooks | Home |
Copyright © 2003, The
Hindu Business Line. Republication or redissemination of the contents of
this screen are expressly prohibited without the written consent of
The Hindu Business Line
|