The Hindu Business Line : SEBI restricts execution of share splits before IPO

THE Securities and Exchange Board of India (SEBI) has restricted companies to execute share splits just before an initial public offering (IPO). This has been incorporated in the amendments made to the Disclosure and Investor Protection guidelines.

The existing provisions regarding minimum application size in terms of number of shares has also been modified. This is in view of the fact that retail investor has now been defined as an investor who applies for bids for securities of value that is not more than Rs. 50,000. Accordingly, the minimum application size provision has been replaced with minimum application value and this value has been fixed at a range of Rs 5,000-7,000.

The amendment also stipulates that under post-issue obligations, allotment of shares on proportionate basis will be within the specified categories (retail, HNI, Institutional etc.), subject to a minimum allotment being equal to the minimum application size as fixed and disclosed by the issuer.

Since public issue of tax savings bonds receive heavy oversubscription - which exceeds the minimum target amount mentioned in the prospectus - the market regulator noted that returning the excess subscription would adversely affect the investors whose tax planning measures normally take into account such investments. In order to rectify this, the guidelines have been amended to provide that once the issue size and oversubscription limits are disclosed in the shelf prospectus, issuers can raise and retain any amount through tranche issues, so long as they are within the limits prescribed by the shelf prospectus.

The amendment, the provisions of which are valid with immediate effect, also clarifies that the green-shoe option is available for both initial public offers and follow-on offers. The option is also available irrespective of whether the offer is through the book-building or fixed- price route.

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SEBI restricts execution of share splits before IPO