The Hindu Business Line : Panel for more leeway for retail investors in IPOs

THE Primary Market Advisory Committee of SEBI is seeking to increase the maximum application amount of each retail investor in IPOs to Rs 1 lakh. Currently, a retail investor is not allowed to invest more than Rs 50,000 in IPOs.

The committee observed that the current level of Rs 50,000 per investor is too small in the context of large-size book building issues and is also the reason for investors to make multiple applications in order to satisfy their investment appetite.

It has also recommended a reduction in the allocation to the non-institutional buyer category for book building issues. Currently, in a book built issue, qualified institutional buyers (QIBs), non-institutional buyers (NIBs) and retail investors are allotted in the ratio of 50:25:25.

The committee is seeking to change this ratio so that retail investors get 35 per cent and NIBs would not be allocated more than 15 per cent of the total issue, in a voluntary book building issue and in issues where book building is used to satisfy the eligibility norms in terms of DIP (Disclosure and Investor Protection) guidelines.

For other book building issues, retail investors would be allocated 30 per cent, NIB 10 per cent and QIBs 60 per cent.

"In the event of under subscription, the above allocation categories would not apply and there would be full fungibility among categories. The disclosures in the offer document should clearly specify the manner of allocation among categories in the event of under subscription," it said. In view of the hype surrounding many of the big book building issues, the committee suggests that the bidding period should be reduced to 3-7 days from 7-10 days.

It has also recommended that there should be uniform data display on the Web sites of both the stock exchanges. The stock exchanges should display the consolidated figures for both the exchanges and should ensure that they communicate among themselves to ensure congruency in the data displayed.

Issuers would also be required to disclose the parameters and allocation made to QIBs. "It was also informed that in case of allocation to QIBs, various factors were to be considered including quality of investor, commitment to specific sector, investment objectives, prior track record etc. These factors could vary from one issue to another," said the report.

It has also recommended that the requirement of disclosure of price band in the offer document may be done away with, in the case of listed companies. This is because price guidance is already available in the form of secondary market prices. The report has been put up for public comments.

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