Sebi Moves to Simplify Fund-Raising
Regulator considering e-IPOs, raising quota for anchor investors and tax benefits for retail players, among other steps
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.
UK Sinha: ON THE JOB