Sebi panel for changes in book-built floats

The primary market advisory committee of Securities and Exchange Board of India (Sebi) has recommended that in the case of mandatory book-built issues for profitable entities, retail investors should be allotted a minimum 35 per cent of shares.

The panel also suggested that non-institutional buyers (NIBs) should not be allotted more than 15 per cent, while qualified institutional buyers (QIBs) should get a minimum 50 per cent of shares.

At present QIBs, NIBs and retail investors are allotted in the ratio of 50:25:25. For non-profitable entities, the recommendation is that the allotment should be in the ratio of 60:10:30. Voluntary book-built issues should follow the same criteria as for profitable entities.

Defending the recommended changes the committee said that in most case NIBs leverage IPO financing and are the maximum sellers in the market as soon as the issue opens for trading.

"There was also a possibility of financing leading to ramping up of prices on listing," it said, justifying the reduction in allocation to the NIB category.

There has also been a redefinition of the retail investor with an upward revision in their investible limit to Rs one lakh in a primary issue. At present it is Rs 50,000.

The tenure of the bidding period is also sought to be reduced from the current 7-10 working days to 3-7 working days in order to reduce hype surrounding the subscription figures.

Another recommendation is that the stock exchanges should display the consolidated figures for both the exchanges and should ensure that they communicate among themselves to ensure congruency in the data displayed.

The data pertaining to an issue should be displayed on the site for a further period of three days after its closure. There should be a common book between NSE & BSE.

Discretionary allotment to QIBs would remain but the offer document has to disclose the parameters on which the allotment will be made.

While price bands for new issuances will remain, for issues of existing companies price band would be announced only one day prior to the bids opening and investors will have to be guided by the secondary market prices.

The committee has also recommended doing away with the 75 per cent book-building provision and the only the 100 per cent will remain.