The Securities and Exchange Board of India is considering the option of changing the allotment norms for different categories of investors taking part in initial public offers.

According to sources familiar with the development, the market regulator is in the process of identifying the investor category that is responsible for the maximum volatility when shares are listed on the stock exchanges after allotment.

The exchanges have details of trading patterns of various investor categories. Once the category contributing to the maximum volatility is identified, its allotment will be scaled down.

At present, around 50 per cent of the shares in a public offer is set aside for qualified institutional buyers, and another 25 per cent is reserved for non-institutional investors, including high net worth investors and retail investors.

"Several meetings have been held to discuss the issue. Various options, including a greenshoe option, have been discussed," a source said.

Book-building norms already provide for the greenshoe option that of retaining a portion of the excess subscription.

Retaining the oversubscription helped to stabilise the market to some extent, participants in the meeting said.

This option was exercised at the time of the Maruti public issue. However, the greenshoe option cannot be exercised when the number of shares being offered to the public is fixed.

Sebi is reportedly worried about the volatility in share prices immediately after listing, especially since retail investors, who are not able to predict how share prices will move during the course of the day, always seem to be at the receiving end.

Qualified institutional buyers were earlier allowed a higher allotment of 60 per cent of the total shares on offer. This has now been scaled down to 50 per cent as it is felt that retail investors should have a larger share of the pie.

Listing trouble

• Sebi is identifying the investor category that is responsible for the maximum volatility when shares are listed on the stock exchanges after allotment.
• At present, around 50 per cent of the shares in a public offer is set aside for qualified institutional buyers, and another 25 per cent is reserved for non-institutional investors, including high net worth investors and retail investors.