New Year resolutions

Updated: Jan 2 2006, 05:30am hrs
The Securities and Exchange Board of India (Sebi) has ended 2005 by announcing a slew of reforms aimed at streamlining market procedures and regulations. Proof that the regulator is listening to the problems of market players and intermediaries and is seeking to set right anomalies in the system. One of the most important moves aims to provide flexibility to promoters to hike their stakes in companies beyond 55% by acquisitions through the secondary market route. The earlier restriction, which forced promoters to make a mandatory 20% open offer if they wanted to so hike their stakes, was often seen as restrictive and expensive. With corporate India on a consolidation drive and several companies going for restructuring, the Sebi move provides much-needed relief to promoters seeking to fortify holdings. The takeover norms have also been aligned with those of continuous listing, removing the anomalies in the process.

A major initiative is the optional grading of initial public offers (IPOs). While Sebi chairman M Damodaran did say that nothing prevented the regulator from making this mandatory, Sebi probably wants to give companies some leeway and see how they move towards this self-appraisal route. A grading of IPOs would arm the common shareholder with enough knowledge to empower him to take the right decision, as the market once again begins witnessing a rush of new issues. A typical problem with IPOs has always been the lack of adequate information for the investor and grading is the right step in such a situation.

By raising the cut-off limit for biometric registration under the MAPIN scheme from Rs 1 lakh to Rs 5 lakh (the limit to be reduced progressively), the regulator has addressed the concerns raised. At the same time, it has ensured a clear audit trail of trades even between Rs 1 lakh and Rs 5 lakh, since investors have the option of quoting either their permanent account numbers (Pan) or their unique identification numbers (UIN) in such cases. At a time when concerns are raised regularly over the quality of transactions in the equity markets, the move can only strengthen the hands of stock exchanges and minimise fraudulent and benami trades. By allowing the introduction of gold exchange traded funds (GETFs), the regulator has also recognised the potential of leveraging Indias enormous holdings of the precious metal. India is the biggest storehouse of gold in the world and this move will highlight gold as an alternative investment option. Clearly, Sebi has its agenda for the new year all charted.