Sebi Moves to Sim­plify Fund-Rais­ing

Reg­u­la­tor con­sid­er­ing e-IPOs, rais­ing quota for an­chor in­vestors and tax ben­e­fits for re­tail play­ers, among other steps

The Economic Times - - Front Page - OUR BUREAU

In­dia’s cap­i­tal mar­ket reg­u­la­tor Sebi is plan­ning a raft of mea­sures to sim­plify fundrais­ing for cor­po­rates through pri­mary mar­kets.

The reg­u­la­tor is plan­ning to al­low elec­tronic-ini­tial pub­lic of­fers, raise the quota for an­chor in­vestors and tax-ben­e­fits for re­tail in­vestors in­vest­ing in IPOs and op­tion­ally fully con­vert­ible in­stru­ments, among other things, its chief, UK Sinha, said at an As­socham con­fer­ence.

Sinha said the reg­u­la­tor wants fir ms to raise money from the lo­cal mar­kets rather than from abroad and has en­gaged with var­i­ous stake­hold­ers in the last one month.

Sebi has re­ceived sug­ges­tions to in­tro­duce e-IPO for re­tail in­vestors, wherein an in­vestor can ap­ply for an IPO di­rectly on­line, elim­i­nat­ing the need to fill a phys­i­cal form. The move is aimed at pro­vid­ing re­tail in­vestors with an additional mech­a­nism as in­vestors can now sub­mit ap­pli­ca­tions sup­ported by blocked amounts at 1,000 cen­tres.

“There are some sug­ges­tions for Sebi from cham­bers to think of a real eIPO, which means the sec­ondary mar­ket prac­tice is repli­cated. But mer­chant bankers have a prob­lem with that be­cause in the In­dian con­text and many other coun­tries, there is a syn­di­cate of mem­bers who are given the right to of­fer or mar­ket that is­sue. We are ex­am­in­ing this,” Sinha said. “It’s high time we got rid of lakhs and crores of phys­i­cal ap­pli­ca­tion forms that are printed for each IPO. e-IPOs would not only save

Sinha said the reg­u­la­tor wants firms to raise money from the lo­cal mar­kets rather than from abroad

costs and be en­vi­ron­ment-friendly, but would also lead to faster pro­cess­ing and list­ing,” said Prithvi Haldea of New Del­hibased Prime Data­base.

The Sebi chief also said there is a de­mand to in­crease the quota for an­chor in­vestors. At present, 30% of the to­tal Qual­i­fied In­sti­tu­tional Buyer (QIB) por­tion is re­served for an­chor in­vestors. QIBs in­clude mu­tual funds, banks, fi­nan­cial in­sti­tu­tions and pri­vate eq­uity funds, among oth­ers. Haldea is of the view that this should be done to a limited ex­tent, sub­ject to com­plete trans­parency in terms of se­lec­tion of and al­lo­ca­tion to an­chor in­vestors. The regu- la­tor has also re­ceived sug­ges­tions that tax ben­e­fits should be pro­vided to re­tail in­vestors who in­vest in pri­mary mar­kets. “This is for the govern­ment to de­cide, but any govern­ment will find it dif­fi­cult to al­low this,” Sinha said.

The Ra­jiv Gandhi Eq­uity Sav­ing Scheme aimed at sec­ondary mar­ket trades and brand new in­vestors has been a non-starter and should be scrapped, Haldea said. “In­stead, a new tax scheme should be an­nounced which is fo­cussed on cap­i­tal for­ma­tion (IPOs) and for all small in­vestors – new or ex­ist­ing.”

Be­sides e-IPOs, Sinha said cor­po­rates may be al­lowed to raise money through con­vert­ibles, wherein com­pa­nies mak­ing an IPO could also of­fer op­tion­ally fully con­vert­ible deben­tures (OFCDs) in­stead of shares to re­tail in­vestors.

Sinha said since pric­ing is an is­sue, one par­tic­u­lar way out could be the con­vert­ible in­stru­ment op­tion.


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