Move hiking retail investment limit may increase paper work

Mumbai, March 27 | Updated: Mar 28 2005, 05:38am hrs
The move by the Securities and Exchange Board of India (Sebi) to double the investment limit for retail investors and hiking their investment portion in initial public offerings (IPO) has sent intermediaries associated with the issue on a tizzy. With the hike in the investment limit and size for the retail investors, Sebi has now made it mandatory to attach a copy of their permanent account number (PAN), which has increased paperwork substantially for registrars.

The market regulator has allowed some issuers on a selective basis the facility where retail investors can bid up to Rs one lakh in certain IPOs where it has asked the managers to reserve 35% of the issue for such investors. But there is a rider: that every retail application of over Rs 50,000 must have a copy of their PAN card or PAN allotment letter.

Already three companies, Punjab National Bank (PNB), 3i Infotech and Allahabad Bank have taken the advantage of the in-principle approval given by Sebi for raising the retail bidding portion limit from 25% to 35%.

The regulator has also allowed retail bidders in these IPOs to bid for an amount less than or equal to Rs one lakh per application. So far, retail players could only invest a maximum up to Rs 50,000 per application. Sebi gives such permission to those issuers who wish to have more retail participation in their IPOs, said sources.

Instead of reducing paperwork, the new regulation has increased it, investment banking sources said. In all the three issues PNB, 3i Infotech and Allahabad Bank players investing above Rs 50,000 per application have to attach his or her copy of the PAN card or the PAN allotment letter. In other issues, where the retail portion of the total issue size is only 25%, applicants had to mention only their PAN allotted under the Income Tax (IT) Act.

Kamlesh Gandhi, executive director, Centrum Finance, said: Instead of making things simpler, the new requirement has added to extra work. It has increased the scope for more delays.