07 January 2012

SEBI-IPP

A.     As a New Year gift to the Companies that are not meeting the Minimum Public Holding requirement, SEBI has at its Board Meeting held on 3rd January 2012 decided to introduce the following additional methods, for the purpose of compliance with the provisions of SCRR with regard to the Minimum Public Shareholding to be maintained in any listed company:

      1.      Institutional Placement Programme (IPP); and

2.            Offer for sale of shares through stock exchanges


Both the above mentioned methods have certain salient features/ pre prequisites and need to be followed in compliance therewith. Under both the options, caps have been specified, in terms of the Issue Size, limits of dilution, categories of allottees/ transferees, procedure for allotment etc.

The highlights of IPP Method are as follows:

Public shareholding can be increased by 10% or such lesser percentage as is required to comply with the minimum public shareholding requirement.

Shares can be sold only to qualified institutional buyers, with a reservation of minimum 25% to mutual funds and insurance companies.

Issuer shall announce an indicative floor price or price band atleast one day prior to the opening of the offer.

The aggregate demand schedule shall be displayed by stock exchanges.

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

The allotment of shares may be made on price priority, proportionate or on pre- specified criteria which has to be disclosed in advance in the prospectus and cannot be changed subsequently.


The highlights of Offer of shares through stock exchanges are as follows:


A separate window shall be offered by the Stock Exchange.

The offer shall be for atleast 1% of the paid-up capital of the company, subject to minimum of Rs. 25 crores.

Only the promoter/ promoter group of companies which are active /eligible for trading would be permitted to offer their shares for sale.

Every bid/buy order would be required to be backed by 100% upfront cash margin. The settlement shall be through exchange clearing mechanism.

Allotment would be done either on price priority or clearing price basis proportionately and would be overseen by the exchanges.

Further, it has also been decided that Offer for sale through the stock exchanges method can, apart from being used for compliance with minimum shareholding requirements, also be used by the promoters of top 100 Companies (based on average market capitalization) for sale of their stake.

To recapitulate, SEBI had vide its Circular dated 16th December 2010, mandated that for the purpose of compliance of Cl 40 A of Listing Agreement, listed companies could have resorted to either issuance of shares to public through prospectus or  offer for sale of shares held by promoters to public through prospectus or  sale of shares held by promoters through the secondary market, with the prior approval of the Specified  Stock Exchange, within the timelines specified by Ministry of Finance.

This move for allowing the above 2 additional methods shall prove Industry friendly in meeting with the Minimum Public Shareholding requirements in case of listed companies.

B. Further, SEBI has also decided to make the following amendments in the SEBI Buyback Regulations:

Procedure for acceptance of shares in buy back through tender offer: The company shall announce ratio of buyback as is done in the case of rights issues and fix a record date for determination of entitlements as per shareholding on record date. While the shareholders will be free to tender over and above their entitlement, acceptance of shares shall first be based on entitlement of each shareholder and if any shares are still left to be bought back, acceptance of additional shares tendered over and above the entitlement shall be in proportion to the excess shares tendered by the shareholder.
"Record Date" in lieu of Specified Date.

Review of requirement of issuing Public Notice and Public Announcement: The Public Announcement shall be published within two working days from the date of Board or Shareholders resolution, as the case may be.

Rationalisation of timelines in buyback through tender offer: It has been decided to revise the time lines for various activities involved in the buyback process.

SEBI has also issued a Circular bearing no. CIR/IMD/FIIC/1/2012 dated 3rd January 2012, with respect to the investment limits of FIIs in Government debts and Corporate debts, whereby it has withdrawn the facility of re-investment and now re-investment period shall not be allowed for all new allocations of debt limit to FIIs/sub-accounts.

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