MUMBAI: In an effort to ensure that mid-sized investors are not left out of public offerings by very large investors, market regulator SEBI Proposal to segregate high net worth investor on Monday (HNI) Participation in Initial Public Offerings (IPO) in two parts.
Under the first sub-category within the overall HNI segment, only those investors who submit applications between Rs 2-10 lakh will be allowed. Investors who wish to apply for more than Rs 10 lakh will be added to the second sub-category.
SEBI has come out with a discussion paper on these proposals and has asked the public to give their suggestions by October 20. Under the current arrangement, anyone who wants to invest more than Rs 2 lakh during the bidding process in an IPO falls under the HNI category. . Applications up to Rs 2 lakh are considered for retail investors. SEBI is of the view that even very large applications may pose some additional risk to the market and hence the proposed changes.
SEBI also proposed that one-third of the HNI stake in all IPOs should be reserved for investors belonging to the first sub-category, i.e. applications between Rs 2 lakh and Rs 10 lakh. The remaining two-thirds will be for applications above Rs 10 lakh within the HNI category.
SEBI also proposed that the minimum price difference between the lower and upper bands in the IPO should be fixed at 5%. This means that in each IPO At the upper end, the price should be at least 5% higher than the floor price. There are currently no such bands. There have been IPOs in which the difference between the upper band price and the floor price has been as low as Re 1 only. SEBI feels that such narrow price differential defeats the purpose of bidding and makes the IPO as fixed-priced. The company and merchant bankers actually set the price rather than the investors applying to the offer.
At present, SEBI allows fixed price and book building method in IPOs. every book-making IPO There should be a price band in which the investors will be allowed to bid for the prices at which they want to buy the shares. Existing rules also state that the price at the upper end of the band should not exceed 20% of the lower price.
The discussion paper was published after detailed deliberations by the primary market advisory committee of the market regulator.PMAC“The objective of a fair and transparent price discovery mechanism in book-built issues has been weakened over time due to the evolution of market practices,” the paper said.
Under the first sub-category within the overall HNI segment, only those investors who submit applications between Rs 2-10 lakh will be allowed. Investors who wish to apply for more than Rs 10 lakh will be added to the second sub-category.
SEBI has come out with a discussion paper on these proposals and has asked the public to give their suggestions by October 20. Under the current arrangement, anyone who wants to invest more than Rs 2 lakh during the bidding process in an IPO falls under the HNI category. . Applications up to Rs 2 lakh are considered for retail investors. SEBI is of the view that even very large applications may pose some additional risk to the market and hence the proposed changes.
SEBI also proposed that one-third of the HNI stake in all IPOs should be reserved for investors belonging to the first sub-category, i.e. applications between Rs 2 lakh and Rs 10 lakh. The remaining two-thirds will be for applications above Rs 10 lakh within the HNI category.
SEBI also proposed that the minimum price difference between the lower and upper bands in the IPO should be fixed at 5%. This means that in each IPO At the upper end, the price should be at least 5% higher than the floor price. There are currently no such bands. There have been IPOs in which the difference between the upper band price and the floor price has been as low as Re 1 only. SEBI feels that such narrow price differential defeats the purpose of bidding and makes the IPO as fixed-priced. The company and merchant bankers actually set the price rather than the investors applying to the offer.
At present, SEBI allows fixed price and book building method in IPOs. every book-making IPO There should be a price band in which the investors will be allowed to bid for the prices at which they want to buy the shares. Existing rules also state that the price at the upper end of the band should not exceed 20% of the lower price.
The discussion paper was published after detailed deliberations by the primary market advisory committee of the market regulator.PMAC“The objective of a fair and transparent price discovery mechanism in book-built issues has been weakened over time due to the evolution of market practices,” the paper said.
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