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June 8, 2001
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Money > Business Headlines > Report June 8, 2001 |
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10 per cent IPO norm extended to all corporatesSubhomoy Bhattacharjee The government has decided to lower the minimum listing requirement for all corporates from 25 per cent to10 per cent. A notification to be issued by the finance ministry shortly will however specify that the company must have an offer size of 2 million securities with a minimum offer value of Rs 1 billion. Information technology and other knowledge-based companies already have a minimum listing requirement at 10 per cent. The Securities and Exchange Board of India had earlier proposed that the relaxation be offered on the condition that the minimum offer size be Rs 2.50 billion. The decision of the Sebi primary market advisory committee was in line with market demands that corporates should not be forced to offload 25 per cent equity at one go. Also, it was argued that the lower limit would allow high market capitalisation corporates to offload small amounts of equity by placing it with institutional investors. Reacting to the proposed move, merchant bankers and brokers said the lower entry point criteria will help many corporates float IPOs with the promise that they could enhance the public shareholding once the primary markets revive. "It should lead to a small revival in the primary markets," a broker said. Finance minister Yashwant Sinha had reduced the limit to 10 per cent for the booming IT sector in 1999 to encourage many of the closely held companies in these sector to access the stock markets to fund their expansion. In the last fiscal, he extended the benefit to other knowledge based companies like the pharmaceutical sector. The notification is meant to spur the currently dormant stock markets where the number of IPOs has sharply plummeted after the stock scam in March. Besides, the government felt the number of shares which can attract retail investors have dwindled as many of the previously highly rated stocks have fallen in value. The government has often said that the major task is to bring the small investors back to the market. This, they feel, can be done by encouraging a number of closely held but good companies to access the bourses but without running the risk of takeovers. Powered by YOU MAY ALSO WANT TO READ:
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