The Sebi board will meet here tomorrow to discuss steps required for dealing with promoters failing to comply with minimum public shareholding in listed companies, as also safeguarding small investors’ interest in initial public offerings (IPOs).
The regulator is also expected to update its board about two high-profile corporate cases — one involving refund of investors’ money by Sahara group and the other about Reliance Industries’ appeal against its decision on settlement of cases through the consent mechanism. The board may also approve new measures to help companies meet minimum public holding norms, a senior official said.
The private sector companies need to attain a minimum public holding of 25 per cent by June this year, while a threshold of 10 per cent is required by PSUs by August. Promoters of nearly 190 companies are yet to bring down their shareholding to the desired level to meet the norms, although Sebi has already provided options to meet these guidelines.
In its tomorrow’s meeting, Sebi is also likely to discuss final norms for a proposed ‘mandatory safety net mechanism’ in IPOs, on which it floated a discussion paper in September and had sought public comments till October 31, 2012, while the regulator will update its board about RIL and Sahara cases.
Besides Chairman U K Sinha and three whole-time members (Prashant Saran, Rajeev Agarwal and S Raman), the nine-member Sebi board also comprises nominees from Finance Ministry (Arvind Mayaram), Corporate Affairs Ministry (Secretary Naved Masood) and RBI (Deputy Governor Anand Sinha).
The other two appointed members are V K Jairath and Prakash Chandra Chhotaray.
Mukesh Ambani-led RIL has approached Securities Appellate Tribunal against Sebi with regard to the regulator’s decision to reject its plea to settle an alleged insider trading case through consent mechanism.
Under the consent mechanism, Sebi can settle an ongoing case after payment of certain charges and the ill-gotten gains, if any, without admission or denial of wrongdoings by the concerned entities.
However, Sebi changed its consent framework regulations in May 2012, pursuant to which it found many applications, including those of RIL, unsuitable for settlement through this mechanism.
RIL’s appeal before SAT was earlier scheduled for January 3, which was first adjourned till January 11 and thereafter to January 24 after Sebi sought time to study the petition.
In Sahara case, Sebi has been asked by Supreme Court to facilitate refund of thousands of crores of money collected by two group companies from close to three crore bondholders.
Under the proposed ‘safety net’ norms, Sebi has said that the companies making initial public offers could be asked to mandatorily refund the money to small retail Indian investors, if the price of the shares plunge by more than 20 per cent within three months of listing.
The safety net would be applicable for those resident retail individual allottees applying for shares worth up to Rs 50,000, while the total obligation on the companies would be capped at five per cent of the IPO size.
Further, the 20 per cent fall in share price would be considered over and above the general fall, if any, in one of the two broader market indices, BSE-500 or S&P CNX 500.
The proposal was first discussed by Sebi’s board on August 16, but it was felt that a wider public discussion was needed.
The proposal is aimed at helping boost the investor sentiments, as also to help bring sanity in IPO pricing by the companies and their merchant bankers. It has been proposed that the companies can pass on the liability for ‘safety net’ payments to their merchant bankers.
Sebi mooted the proposal after it found that the shares were trading below their public offer price even after six months of listing in more than 60 per cent cases, while the decline was of more than 20 per cent in a majority of IPOs.
