SEBI

BSE, NSE launch exchanges for SMEs
BSE Ltd, the oldest bourse of Asia, inaugurated its platform for Small And Medium Enterprises
(SME) under the brand name of BSE SME Exchange with listing of BCB Financewith, while the
Current Affairs Published on www.gktoday.in from January 1, 2012 to
September 10, 2012
National Stock Exchange of India Ltd (NSE) declared the launch of its own SME platform, Emerge. SEBI, in May 2011
had given in-principle approvals to both the national exchanges for the same.
As small enterprises usually find it difficult to get investors and raise money, the guidelines for
SMEs have quite a few relaxations compared with norms for other listed companies. SMEs can
submit only half-yearly financial results and are relieved from giving detailed annual reports.
The exchange will provide opportunity to SME entrepreneurs to raise equity capital for growth and expansion. It will
also provide immense opportunity for investors to identify and invest in good SMEs at early stage.
 Retail investors are virtually barred from the SME platform as the minimum lot size for an IPO as well as trading is
Rs 1 lakh that will suit only wealthy and informed investors.
 IPO prospectuses of SMEs will be vetted by exchanges rather than SEBI.
 Any company with an issue capital smaller than Rs 10 crore at the time it makes its IPO will be allowed to list on
an SME platform. The company can list on the main bourses if its issue capital crosses Rs 25 crore subsequently.
Issue capital is the nominal value of the total shares of a company.
 Market-makers will be required to give two-way bids 75% of the time. Market-makers are brokers who take the
risk of holding a certain number of shares with themselves to facilitate trading, in return for compensation.
 SEBI has also allowed venture funds to fund market- making activities under a special category of “nominated
investors”.
Analysts hold a view point that market design may need to be tweaked as earlier attempts to start SME platforms were
not a success in India. OTC Exchange of India, started in 1990 and modeled on the over- the-counter market in the USA,
could manage only 100-odd listings and is almost lifeless now.

 

SEBI

Working in the direction of making the process of disinvestment hassle free, capital market regulator SEBI fine-tuned norms governing Offer For Sale (OFS) & Institutional Placement Programme (IPP). IPP and OFS are the two new share sale tools initiated by the regulator in January, 2012 primarily to assist the corporate enhance their public float.

According to SEBI:

· The mandatory 12-week time gap requirement b/w two consecutive Offer for Sale (OFS) or Institutional Placement Programme (IPP) will be relaxed. However,promoters who have already offloaded their shares through OFS or IPP will have to maintain a gap of 2 weeks b/w two successive OFS or IPP. The decrease in the time gap will facilitate companies to offload shares in more than one tranches

depending on market conditions.

· The indicative price should be displayed during the last 60 minutes of the close of

bidding session irrespective of the book being built. However, as per the current

norms, bids were invited without revealing indicative price during the trading hour.

The disclosure of indicative price could also lead to bidding taking place at the last

one hour of trade.

· After these changes in the norms, modification or cancellation of bids can be done

in the last 60 minutes instead of last 30 minutes of the trade.

· The minimum size of the offer should be Rs 25 crore. However, the size of offer

can be less than Rs 25 crore so as to accomplish minimum public shareholding in a

single tranche. Such alterations have been made to enable the companies achieve

the minimum 25% public holding guideline by June 2013.By June 2013, all listed companies are required to have at least 25% public holding, while in case of stateowned company the limit is 10% to be achieved by August 2013.

· Around12-13 PSU companies which have to meet the public holding guidelines can

gain from the alterations in norms.

· Institutional investors will have the choice of applying with 100% upfront margin in

cash or with an ad hoc margin of certain lower percentage to be determined by the

exchanges.

The government will be able to promptly offload its stake in PSUs and generate funds for reaching the disinvestment target of Rs 30,000 crore for the fiscal 2012-13. ONGC, Wipro, Godrej Properties and DB Corp are some major companies to have conducted share sales through these two new routes

Market Regulator SEBI allowed Auctioning of Securities through Stock Exchanges

The capital market regulator SEBI on 3 January 2012 allowed auctioning of securities through stock exchanges and introduced a new method for institutional placement of stocks. The move was directed to kick-start government's divesment programme as well as help promoters of companies to sell a part of their holdings.

As per the auctioning route, a special window can be used by promoter stakeholders to sell at least 1% of the paid-up capital of a company. It is similar to the block-deal mechanism for secondary stock market transactions, but with lesser restrictions. The auction method can be only used by promoters of top 100 companies based on average market capitalisation for sale of their stakes.

Institutional Placement Programme (IPP)

Under the institutional placement programme (IPP), shares can be sold only to qualified institutional buyers.

Exchanges will provide a separate window for the offer for sale of shares which will co-exist with the normal trading hours. promoter or promoter group of companies however will not be allowed to bid for the shares.  Allotment will be done either on price priority or clearing price basis proportionately and would be overseen by the exchanges.

SEBI’s measure is considered to be very progressive step towards creating an organised and effective mechanism that will not only facilitate fund raising but also assist companies to comply with the listing norms in a non-disruptive manner.

There shall be at least 10 allottees in every IPP issuance. No single investor shall receive allotment for more than 25% of the offer size.

For the purpose of compliance with public holding norms, SEBI had earlier directed all such promoter shareholders to dilute their equity stake to 75% or below by June 2013 through public offering of shares. The companies’ were also barred from using the qualified institutional placement ( QIP) route for diluting promoters' shares. However, the new institutional placement route can be used for either fresh issue of shares or dilution by the promoters through an offer for sale.

The IPP method can be used to increase public holding by 10% and could be offered to only qualified institutional buyers with 25% being reserved for mutual funds and insurance companies.

Under the IPP, companies will have to announce the ratio of buy-back, as is done in the case of rights issues and fix a record date for determination of entitlements as per shareholding on record date. Besides improving efficiency, the revised buy-back process is expected to give a fair deal to all shareholders.

Recently Union cabinet has approved foreign investment up to

49 per cent in power Trading Exchanges in compliance with SEBI regulations. What

are the restrictions for the FDI and FII routes with in the 49 per cent? [A]Maximum of

26% in FDI and maximum of 23% in FII