The Securities and Exchange Board of India (Sebi) also asked state-owned companies to increase their minimum float or the number of shares that are available for non-promoters to 25% should all firms comply with this, it would mean R60,000 crore of equity at current market prices.
Sebi also decided that the minimum dilution to the public in an initial public offering (IPO) should be the smaller of 25% or R400 crore; the rule applies to companies with a post-capitalisation of less than R4,000 crore. With this, the regulator can prevent companies from deliberately increasing their post-capitalisation value to more than Rs 4,000 crore in order to dilute a smaller stake.
Sebi also allowed non-promoters with a shareholding of more than 10% to tap the offer for sale (OFS) route while reserving 10% of the issue for retail investors and making another 100 companies eligible to use the mechanism. The market will expand and more sellers can now offload shares in a transparent manner through an auction rather than doing a block deal, explained Sanjay Bajaj, MD and head of equity capital markets, HSBC, adding that buyers too will get a much wider choice. Bajaj pointed out that investors such as private equity firms, which were earlier not eligible to use the OFS route, could now do so.
At a board meeting on Thursday, Sebi doubled the quota for anchor investors within the qualified institutional investors (QIB) portion of public offerings to 60% from the current 30%. Sanjay Sharma, MD and head of equities at Deutsche Equities, believes the move will facilitate price discovery and attract more high-quality institutional buyers who were earlier reluctant to participate because they were not sure they would get enough shares. A discretionary allotment will encourage more funds to participate in an issue, Sharma said, pointing out that the issue itself was likely to be more successful with 60% of the QIB portion subscribed even before it opened.
An anchor investor typically is allotted shares one day before the issue opens for subscription but must hold the shares for at least 30 days after the shares are allotted.
In FY08, around R41,323 crore was raised through IPOs while in FY11, an amount of R33,100 crore was mopped up; of this, R15,200 crore was raised by Coal India (CIL) alone.
With the top 200 companies by market capitalisation now allowed to offload shares through the OFS mechanism only the top 100 companies were eligible so far the supply of equity is expected to go up.
The OFS route was introduced in February 2012 as a fast-track mode for sale of shares by promoters and more than 100 companies, including state-owned firms, have sold shares this way, picking up close to R50,000 crore. Among the bigger OFS issues was that of NTPC, which raised nearly R11,500 crore, and that of ONGC, which raised R12,400 crore.
By expanding the regulation of a 25% minimum public float to listed state-owned companies, Sebi has created a level playing filed. Thirty-three companies have public shareholding below 25% and at current prices could fetch the government close R60,000 crore, with CILs share at R36,000 crore, or nearly 60% of the total amount.
The Sebi board decided that the minimum dilution to the public in an IPO shall be 25% or R400 crore, whichever is lower, for companies with post capitalisation of less than R4,000 crore. If less than 25% is diluted, the minimum public shareholding of 25% has to be achieved within three years of listing. Sebi allowed trusts of companies to purchase their own shares, or those of subsidiary companies, from the secondary market for employee stock options schemes.