The Hindu Business Line : Small-investor concerns

This refers to the article `Primary Capital: Mega issues, macro concerns' (Business Line, August 2), which has rightly concluded that a proper governance system should be put in place at various levels connected to the capital market.

The modus operandi of the allotment of shares, particularly through book-building, is heavily loaded in favour of large investors and market speculators, rather than small investors. It is a well-known theory that the economy grows when the savings of small investors are used for new projects and expansion projects.

Despite retail investors' overwhelming response to public issues, the treatment meted out to them is discouraging.

In the book-building route, small investors invest all their money and the allotment procedure is heavily in favour of institutional investors, against a paltry 25 per cent to the small investor. Further, it is time to abolish the face-value concept being followed in mobilising equity funds. When there was no concept of premium, shares of joint stock companies were issued at a notional value of Rs 10 for convenience and some followed with higher denomination of Rs 100.

With the capital market having been developed significantly and money value having been eroded, there is no rationale for issuing company shares at a face value of Rs 10 and adhering to an odd-lot mechanism, more so when large-scale dematerialisation has taken place.

Thus, it is not too late to have a re-look at aspects such as issuing shares at varying price , or issuing shares at a uniform amount of Rs 100 or Re 1 by doing away with the odd lot.

R. S. Raghavan

Bangalore

Letters to the editor and contributions can be sent by e-mail to: bleditor@thehindu.co.in

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Small-investor concerns