To enhance retail participation in IPOs, SEBI plans to usher in electronic IPOs by tapping broker terminal networks.
Under this, IPO applicants have to approach a broker with an application either in electronic or physical format. Brokers will then punch their application on the system.
“We are talking to the RBI and Indian Banks’ Association to make ASBA (application supported by blocked amount) available in all bank branches under the core banking system,” said U. K. Sinha, Chairman, SEBI, talking to reporters after a meeting of the Board.
“Brokers will be remunerated by issuer companies for using this mode,” he added.
Under ASBA, an IPO subscriber’s bank account is blocked to the extent of his application amount.
However, funds are debited for the allotted shares. With this, the cumbersome procedure of refund is done away with.
Stock exchanges are required to enable downloading of application forms on their Web site and facilitate online tracking.
SEBI plans to incentivise issuers/brokers and banks for encouraging retail investors to use ASBA.
To widen the shareholder base in public issues, SEBI plans to ensure that every retail participant gets a minimum bid lot irrespective of his application size. This is subject to availability of shares.
“The minimum application size band in an IPO is being increased from Rs 5,000-7,000 to Rs 10,000-15,000,” said Sinha.
To facilitate issuers to raise capital, the average free float market capitalisation requirement for follow-on public offers (FPO) and rights issues has been lowered to Rs 3000 crore from Rs 5000 crore.
SEBI has allowed the use of bonus and rights issues for companies wishing to comply with the minimum public shareholding norms of 25 per cent.
“Promoters will not be a part of this. Only non-promoter shareholders will be offered these options,” said Sinha.
“For companies not being able to comply with these norms as on June 2013, SEBI will look at the reasons on a case-to-case basis,” he added.
The minimum promoter contribution of 20 per cent may be relaxed by up to 10 per cent if SEBI registered SME funds, infrastructure funds, PE funds and VCFs, pitch in with a maximum of 10 per cent in total.
The lock-in period for these entities will be the same as that of promoters.
SEBI has also allowed a 20 per cent variation in the issue size of public issues as declared in the red herring prospectus. Earlier, the variation was 10 per cent and any increase necessitated re-filing of the offer document.
Public offerings through the profitability route should have at least Rs 15 crore as average pre-tax operating profit.
For the SME platform or compulsory book building route, the QIB share has been increased from 50 per cent to 75 per cent.
SEBI plans to put in frameworks to expedite clearance of offer documents and to reject them.
Non-retail investors have been barred from withdrawing or lowering their bid size at any stage of a public issue.
“They may increase their bid size,” Sinha said.
For IPOs, issuers are now allowed to furnish the price band five working days prior to issue opening as against the erstwhile two working days.
SEBI has also placed a 25 per cent cap on deployment of issue proceeds under ‘General Corporate Purposes’. Earlier, there was no cap.
SEBI plans to regulate investment advisors (individuals and corporate) who provide investment advice for a fee. “As of now, those who do not charge for advice will not be governed under this regulation,” he said.
Banks and corporates will have to set up a separate subsidiary/division/department to offer advisory services.
Financial planners have to register themselves as investment advisors and can only charge their clients.
However, entities such as stock brokers, portfolio managers, lawyers, CAs, sub-brokers, financial product distributors, merchant bankers, insurance and pension fund agents providing investment advice incidental to their primary activity are exempt.