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Sebi rethinks on pref issue listing norm

Janaki Krishnan

The Securities and Exchange Board of India is reviewing the listing agreement of stock exchanges pertaining to preferential shares.

At present, if a listed company wants to list shares held by promoters under a preferential basis it must seek fresh approval from the stock exchange concerned.

The issue came up recently when a company applied to the Bombay Stock Exchange for listing 205,000 shares which was earlier placed with its promoters on a preferential basis. However, the BSE turned down the request. Incidentally, the company's shares were already listed and being traded.

The company, however, moved the Securities Appellate Tribunal which set aside the BSE order. Since it was a policy matter, the tribunal referred it both to the Sebi and finance ministry for review.

A senior Sebi official said, "We are reviewing the matter and we will have to take a decision soon."

While officials were not forthcoming on conclusion, industry circles are of the opinion that automatic approval would be accorded to such cases of listing, without having to seek the exchange's approval.

Earlier the SAT, while passing its order, questioned the current practice under which further issue of securities of the same class requires fresh listing approval.

According to the tribunal, since the companies are already listed and traded and since the shares issued on preferential basis have been mandated by the company's board and shareholders and the pricing decided as per Sebi guidelines, no fresh approval should be required for listing of the shares.

The tribunal was also of the view that the shares, for which listing approval were sought, were also as the same category as the shares already being traded.

A SAT official said the entire process led to unnecessary delay for investors who had put in their money. The current practise was also against the interest of shareholders, the official said.

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