Sebi may alter norms for QIBs' allotments in IPOs

Securities and Exchange Board of India (Sebi) is likely to tighten norms for big investors like domestic and foreign financial institutions and mutual funds to make the investment process in public offers more transparent.

While there is no move to change the allocation pattern of retail investors and qualified institutional buyers (QIBs), Sebi wants to ensure that merchant bankers do not misuse the discretionary powers of allocating shares to big investors.

Though shares issued in IPOs are allocated proportionally or on a pro-rata basis among retail investors, merchant bankers can now allocate shares to big investors classified as QIBs on "discretion" depending on a host of factors including bid price, quantum of shares bid for and the quality of investors.

"This discretion is causing problem. If retail investors are allocated shares on a pro-rata basis, why not follow the same process for QIBs," an official said while hinting at changes in QIB allotment norms.

An internal group under Sebi is looking into various modifications in the IPO allotment norms, he added.

Sebi norms, at present, allow allocations of 50% for QIBs, 15% for non-institutional buyers and 35% for retail investors.