SEBI eases IDR guidelines, announces other sops for investors

Mumbai: Market regulator Securities and Exchange Board of India announced today that all investors would henceforth be allowed to apply for Indian depositary receipts (IDRs), instruments through which foreign companies can raise money in the Indian market.
SEBI has also reduced the minimum application value for IDRs to Rs.20,000 from Rs.200,000 earlier. At least 50 per cent of the issue must be subscribed by institutional investors, or qualified institutional buyers (QIBs).

IDRs are similar to global depositary receipts or American depositary receipts. Till now, however, only institutional investors were allowed to buy IDRs. This will attract small investors to the new instruments.

It is expected that reputed global groups with a strong presence in India would use these instruments to raise funds. Foreign companies should have a three-year trading track record in a stock exchange.

SEBI has also permitted listed companies to use a fast track route to raise funds. This approach will apply to follow-on and rights issues. Regulatory approvals will be provided quickly, reducing the time taken to raise funds. Some eligibility criteria will apply, including minimum market capitalisation of the public portion of the stock, trading turnover, compliance track record, and investor grievance redressal. 
 
SEBI has made these changes through amendments in the SEBI (Disclosure and Investor Protection) Guidelines, 2000. The regulator has announced several other changes through these amendments. These include the following.

SEBI has made it mandatory to quote the PAN number in application forms for public/ rights issues, irrespective of the value of an application. Currently, applicants in public and rights issues are required to disclose their PAN/GIR numbers only for applications exceeding Rs.50,000.

Companies making public issues have been permitted to issue securities to retail individual investors / retail individual shareholders at discounts of up to 10 per cent on the price offered to other categories of the public. For the purpose, 'retail individual shareholder' has been defined to mean a shareholder whose shareholding value does not exceed Rs.100,000 on the day immediately preceding the record date, and who makes an application or bids in a public issue for a value not exceeding Rs.100,000. Currently, companies are not allowed to issue shares at differential prices to investors within the net public offer category.

Further, application by shareholders of listed companies under the reserved quota has been restricted to retail individual shareholders. At present, listed companies making public issues can make reservation on competitive basis for its existing shareholders who, as on the record date, holding shares worth up to Rs.50,000. Also, now there will be no limit on the value of the application made by such shareholders.

SEBI has also announced the deletion of the chapter ''''Guidelines for Issue of Capital by Designated Financial Institutions (DFIs)'''' from its guidelines. The special dispensations given to DFIs have thus been eliminated.  SEBI had introduced separate guidelines in 1992 for primary issuances by DFIs, to place companies/corporations/institutions engaged mainly in financing of developmental activities and playing a catalytic role in the infrastructure development of the country on a different footing.