Sebi doubles retail limit, tightens IPO norms

The Securities and Exchange Board of India (Sebi) has increased the application limit for retail investors to Rs 2 lakh, from Rs 1 lakh at present. The decision was taken at the regulator's board meeting today.

"If you look at past experience, the complaint from the general investing public and the issuers has been that the retail quota is not being subscribed fully. The issue before the board was that the limit had been fixed long back. If you take inflation into account, it is justification enough (for raising the limit)," said Sebi Chairman C B Bhave, while addressing the media.

The regulator, however, did not make any changes in the quota of shares reserved for retail investors in public issues.

Market players were divided in their opinion on the raise in the retail investor limit. "Sebi's move limit is better late than never," said Deven Choksey, managing director, K R Choksey Shares and Securities. Prithvi Haldea, chairman of Delhi-based Prime Database, felt only the rich would benefit from this. "They (rich) will now take away more shares at the expense of small investors," he added.

The market regulator approved an additional set of disclosures for life insurance companies, based on the recommendations of the Sebi Committee on Disclosures and Accounting Standards.

Insurance companies which want to take the initial public offer route will have to disclose the risk factors specific to life insurance entities and provide a glossary of terms and disclosures specific to the sector. Insurers have been exempted from appointing a monitoring agency and disclosure of a disclaimer clause of the Insurance Regulatory and Development Authority (Irda) in the offer document.

"On the face of it, the disclosures seem generalised in nature. We will be in a position to comment only when we see the details," said SBI Life MD and CEO M N Rao.

To deepen the market, insurance funds set up by the Department of Posts, such as Postal Life Insurance Fund and Rural Postal Life Insurance Fund, were accorded the status of qualified institutional buyers (QIBs).

All listed companies have to mention a fixed date for dividend payment. The regulator directed them to mention the fixed date for payment of dividends and credit of bonus shares.

Promoters who had subscribed to warrants of their companies but failed to exercise these would be ineligible for any kind of preferential issue for one year. The one-year period would commence from the date of expiry of the currency/cancellation of the warrants.

"About two years ago, we had taken this issue to our primary market advisory committee and one of the things suggested in it was the margin collected (it was only 10 per cent). That was enhanced. What else could be done was also taken into consideration and finally a decision has been taken by the board," said Bhave.

Sebi also notified the framework for rights issue of Indian Depository Receipts (IDRs). Disclosure requirement for IDR rights would more or less be in line with the reduced requirement applicable for domestic rights issue.

A decision on the recommendations of the Takeover Panel, formed under the chairmanship of C Achuthan was deferred. "It was felt that some more time would be required to discuss the recommendations of the panel. We would continue the discussions at the next board-level meeting," said Bhave.