SEBI notifies institutional placement norms

Our Bureau Mumbai | Updated on February 01, 2012

Cos can raise funds through offer for sale, fresh issue

SEBI has notified an institutional placement programme that would enable companies to raise their minimum public shareholding to the stipulated 25 per cent.

This programme was announced by SEBI on January 3.

Companies can now raise money from qualified institutional buyers (QIB) either through a fresh issue of shares or an offer for sale by promoters to QIBs. Companies can raise a maximum of 10 per cent through this route subject to shareholder approval and cannot make an allotment exceeding this size.

Due diligence certificate

A merchant banker will exercise due diligence and the placement shall be made on the basis of an offer document, said SEBI. The offer document should contain all material information and the merchant banker is expected to file a due diligence certificate with SEBI.

The floor price or the price band should be announced at least one day prior to the issue by the seller. The issue should be open for a day and a maximum of two days. The aggregate demand schedule should be displayed by the stock exchanges on their Web sites without disclosing the price, said SEBI.

Allotment of securities to a QIB shall be done on a proportionate method, price priority method or any other method which would be disclosed in the offer document. A minimum of 25 per cent of the issue has been earmarked for mutual funds and insurance companies.

Cap on investor

There should be a minimum of 10 allottees and a single investor would not be allotted more than 25 per cent of the offer size said SEBI. However, stock exchanges have the mandate to oversee the allocation / allotment before final allotment.

Promoters and promoter groups are not eligible to buy or sell the securities for 12 weeks before and 12 weeks after the offer. QIBs, who are a promoter and a person related to a promoter, are not eligible.

Bids would be accepted only through ASBA and withdrawal of a bid or downward revision is not allowed.

QIBs cannot sell the securities allotted to them under the institutional placement programme for one year from the date of allotment except on a recognised stock exchange. This is to prevent any off-market transfer of securities between QIBs.

Published on February 01, 2012

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