To improve retail participation in the public issues of state-run companies, the finance ministry has decided to bear brokerage charges in all PSU (public sector undertaking) offers that came after April. The move is expected to encourage brokers to sell issues, which have not received a very encouraging response so far.
“The Department of Disinvestment will bear the expenses relating to the payment of brokerage to brokers or sub-brokers in all government public issues. The decision aims to elicit wide participation of retail investors in government public issues,” the finance ministry said in a release today.
The disinvestment department has directed the book running lead managers appointed for each issue to pay the brokerage or commission within 30 days from the day of listing for issue sizes up to Rs 1,000 crore and within 45 days for issue size above that.
The public sector issuers usually did not pay a brokerage charge on issues, market sources said. This discouraged brokers from promoting the stock to retail investors. The government move would ensure brokers earn a fee, giving them an incentive, analysts said.
The brokerage or commission rates, whichever applicable, would be as stated in the request for proposal (RFP) for appointment of book running lead managers for each public issue, the statement said.
