Market regulator SEBI fine-tunes norms for OFS, IPP

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 state-owned 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

Month: Current Affairs - July, 2012