SEBI proposes norms for price discovery of investment companies

MARKETSREGULATORSECURITIES and Exchange Board of India (Sebi) on Friday proposed to lay a framework for price discovery of shares of listed investment companies(ics)andlistedinvestment holding companies (IHCS) whose market price is at significant discount to their book value.

ICS are companies that earn majorrevenuefrominterest,capital appreciation from investments made, and do not include rental income which is classified under diversified commercial services.ihcsareholdingcompanieswithholdingof51percentor more in other company.

In the draft norms, SEBI said a special call-auction mechanism without price band may be enabled for listed ICS and IHCS, whose shares are trading beyond a certain discount to their book value. For this, stock exchanges will co-ordinate amongst themselvesandprovidethespecialcallauctionmechanismforsuchcompanies, it recommended.

The concept of price bands had been put in place as a risk management and surveillance measure for ensuring orderly trading, appropriate price discoveryandpromotemarketintegrity.

Currently,sharesofafewlisted ICS or IHCS are getting traded infrequently but at a price which is significantly lower than the book value disclosed by the listed entities in their last audited financial statements.

Sebialsosuggestedcertaincriteria for identification of ICS and IHCS eligible for special call auction. “The scrip should have been listed and available for trading at least for a period of 1 year and the company should have been compliant with all the LODR (Listing Obligation and Disclosure Requirement)regulationsincluding submission of audited financial results,” the draft norms said. Total assets of the company invested in shares of other listed companies may at least be 50 per cent. The 6-month VWAP (volume weighted average price) of the security may be less than 50 per cent of the book value of such companies.