The Securities and Exchange Board of India (Sebi) is considering a proposal to bring in a margining system through stock exchanges for issuance of shares through book-building. The move is aimed at eliminating the current concern over lack of any fixed upfront application money that an investor has to pay when investing through a bookbuilding issue.
Sebi has also decided not to end the current discretion that a book runner enjoys in allotting shares to non-retail investors. For retail investors, the allotment has to be done on a proportionate basis as per a recent Sebi diktat.
As per the proposal submitted by Bombay Stock Exchange and discussed in detail by Sebi at a meeting with top merchant bankers on Monday, an investor would be margined at the time of making an application to an issue.
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The issue would be marketed through the stock exchange route through broker's terminals and a margin would be fixed which would have to be paid by investors.
"Like in the case of secondary market, the stock exchange could insist on some margin at the time of application and then also stand guarantee for the application monies. An investor would apply to the broker and then depending on the allotment would either receive the shares or the funds. In the interim, a margin could be levied which would be kept with the stock exchange," said BSE president, Anand Rathi.
Sebi chairman DR Mehta said that the issue of whether investors should be asked to pay a certain amount upfront and not misuse the current discretion in this regard, by making large applications, was discussed.
"There were some concerns expressed by the merchant bankers which have been considered. In the meantime, we have also received a model from the BSE. The issue is being discussed," said Mehta.
Mehta added that there were no plans to end the discretion of merchant bankers in allotment to shares to non-retail investors.
"We have taken some decisions. Some of these may have to be taken to the board. A formal announcement on these measures would be made on Tuesday," said Mehta.