In a slew of measures to rejuvenate the primary market, the regulator on Thursday made it easier for Indian firms to list on the bourses by doubling the quota for anchor investors in public offerings.
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