Capital market regulator Securities and Exchange Board of India (Sebi) today made further relaxation to the offer for sale (OFS) route by giving an option to institutional investors to bid without 100 upfront payments.
Along with the complete upfront margin, institutions will now be able to place orders without upfront margin in line with secondary market practice. However, investors who bid without upfront margins will not be able to allowed to cancel or revise downwards their price or quantity. Also, trades for such investors will be settled on a T+2 basis (transaction date plus two days).
Meanwhile, institutional investors who will bid with 100 per cent margin amount will have a T+1 settlement and also can modify or cancel their orders.
A lot of market participants, including the government, has requested Sebi to do away with the margin requirement due to foreign currency risks and uncertainty of allotment.
Sebi today also made the bidding process more transparent by directing stock exchanges to disclose indicative price and order book throughout the bidding session. Earlier, the indicative pricing was disclosed less than an hour before the close of trading.
The revisions were made to help companies achieve the 25 per cent public shareholding requirement.
Currently, there are about 125 private companies with promoter holding greater than 75 per cent. These companies will have to offload about Rs 23,000 crore worth of paper to attain minimum public holding.
“The deadline of June 2013 to achieve minimum public shareholding is fast approaching and large number of promoters are expected to offload their shares through OFS route,” said Sebi in a release.
Sebi also announced minor tweaks to the takeover code regulations. The regulator said if the open offer obligation gets triggered through a combination of modes, the ‘relevant date’ determining the offer price shall be the earliest date on which obligations are triggered. Sebi also clarified that the date of the board announcement for preferential allotment will be considered as the relevant date for triggering open offer obligations and determination of offer price. Sebi also aligned takeover code regulations with insider trading regulations with regard to buy or sell of two per cent by persons holding more than five per cent.
“The good thing is there were no suggestions from the industry to make substantial changes to the takeover code. Most of the suggestion were procedural in nature,” said UK Sinha, chairman, Sebi.
Sebi also made relaxations to the Infrastructure Debt Fund (IDF) regulations by widening the definition of strategic investors to include systemically important NBFCs and long-term FIIs. Sebi also said permitted IDFs to invest pre-payments in any public financial institutions or infrastructure finance companies. Currently, such funds have to kept in cash or money market funds. Among other things Sebi also extended the new fund offer period for IDFs from 15 days to 45 days and made relaxations in the limits in below-investment grade investments.
“So far Sebi has received only three applications for IDFs, two of which have been approved and one has got an in-principle approval. However, no IDF scheme has been launched so far,” Sinha said.
To develop the bond market, Sebi said that a separate 'debt segment' will be created on the stock exchanges similar to derivatives and currency segments.
Sebi today also allowed two-way fungibility of Indian Depository Receipts (IDRs) and said that would soon provide a detailed roadmap for existing and future IDR issuances. The regulator also tweaked the know your client regulations (KYC) by asking intermediaries to the original documents of their clients and to submit just the scanned images of the KYC documents with proper authentication to the KYC Registration Agency.