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Relax book-building norms, says Sebi panel

BS Markets Bureau in Mumbai

The primary market advisory committee of the Securities and Exchange Board of India has recommended that book-building norms be relaxed and the retail investor be redefined in terms of the amount applied for, instead of the number of shares applied for, to revive the primary market.

The Sebi-constituted standing committee, chaired by M S Verma, chairman of the Telecom Regulatory Authority of India, has recommended that changes be made accordingly to Sebi's disclosures and investor protection guidelines 2000.

The recommendations include allowing companies to declare a floor price just prior to the opening of bids instead of three days earlier as in the Red Herring or final prospectus, allowing them to indicate a 20 per cent price band and a flexibility to revise the band during the bidding period.

They also include allowing companies to have a closed book-building, allowing companies to make an IPO of less than 25 per cent of their post-issue share capital subject to two conditions, and that the black out period for research should be re-stated so that it becomes from 40 days before the issue opening till 40 days after the issue closes.

The other suggestions include making the draft and final offer document available on the lead manager's and company's website till listing, apart from the Sebi website, consider not having a mandatory requirement of 90 per cent subscription and allowing companies to disclose in the prospectus the amount of minimum subscription they require and the sources for meeting the shortfall.

Further, the committee has recommended that all provisions relating to ordinary equity shares will be equally applicable to 'shares with differential voting rights' also.

The committee also underlined the need to amend SEBI (DIP) Guidelines, 2000, prohibiting IPO of shares with differential voting rights prior to an IPO of ordinary equity shares, and to allow composite issue of both ordinary equity shares and shares with differential voting rights. Both ordinary equity shares and shares with differential voting rights have to be of the same denomination.

Shares with differential voting rights are required to be offered to the public nd to be listed compulsorily, subject to compliance in the manner specified in Rule 19(2)(b) of SCR(R),1957.

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