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The government's request for more allowances in regulations governing the offer-for-sale route for stake dilution might not yield much.
Sources close to the development indicate the Securities and Exchange Board of India (Sebi) might not accept all considerations for the OFS mechanism while conducting a stake sale in public-sector undertakings (PSUs).
"We will not want to tinker with the way OFS currently works, as the mechanism is doing well. The requirement to reduce the notice period might not have much impact in the way of curtailing price volatility," said a source.
The government had sought that the notice period for OFS that is currently two days should be reduced for one day to curtail price volatility in the stock.
During the recently conducted OFS in Coal India the stock price crashed by 6% from the day of announcement till the completion of the stake sale.
Another argument by the regulator is that the OFS mechanism, primarily meant for institutional investors and follow-on public offers (FPOs), is a means to promote retail participation.
For FPOs, the regulator recently came out with a discussion paper to allow all PSUs to avail of the fast-track mechanism, to reduce the timeline to just four days.
Another allowance sought by the government was to reduce the time required for opening of a Demat account from the current five days. Sebi has said it is exploring ways to reduce the time but will not be able to make an exception for government offers alone.
"The government is seeking an aggressive strategy for creating awareness among retail investors to participate in stake sale," said an official.
In the Coal India OFS, the retail quota was undersubscribed - 44% of the 20% quota reserved at a discount of five%. Retail investors put in bids worth Rs 1,852.55 crore during the one-day sale. The government raised Rs 22,577 crore through the Coal India OFS.
Additionally, the government had sought that the window for retail investors under OFS be increased by a day. The regulator has not ruled out such a possibility.
