In a far reaching move to develop Indian capital markets, the Securities and Exchange Board of India on Friday decided to remove discretion in allotment of shares to qualified institutional buyers (QIBs) in the public offering and prescribed minimum 25 per cent public holding on continuous basis to improve liquidity for shares.
Currently QIBs get 50 per cent share allotment in the public offering with an element of discretion and make bids without putting margin money.
All the QIBs would now be required to provide 10 per cent margin while putting in their bids. Currently, institutional investors were not required to pay margins upfront while retail investors were required to pay entire amount on application, Sebi chairman M Damodaran told reporters after its 100th board meeting in Mumbai.
Now 5 per cent quota would be carved out from the QIB category for mutual funds registered with the market regulator and they would also be eligible to compete for balance 45 per cent quota for QIBs, he said.
Referring to prescription to have a minimum 25 per cent public holding for listed corporates, Damodaran said listed companies were governed by different rules depending on the time of their listing and this decision, to be implemented in a non-disruptive manner, would help to have more shares of the company in the market.
"For the present, there will be two categories, one for minimum 25 per cent and another for 10 per cent public holding and listed entities will get two years to meet this criterion," he added.