The Securities and Exchange Board of India on Friday said it was introducing restrictions on splitting shares before an initial public offering.

Sebi has also changed the minimum share application size in terms of the value of shares and allowed greenshoe options for all IPOs and not just the book-built ones, as at present.

For issue prices below Rs 500 per share, the face value of the share should be Rs 10 per share. If the issue price is Rs 500 or more, the minimum face value of a share should not go below Re 1.

At present, the guidelines permit the issuer to determine the denomination of shares for public or rights issue and to change the standard denomination.

Sebi has also amended the 'Depositor and Investor Protection' guidelines in respect of the minimum share application size. The retail investor is defined as one who applies for a minimum amount of shares worth up to Rs 50,000. That remains unchanged. But a minimum application value has been introduced -- Rs 5,000 to Rs 7,000.

Applications can be made in multiples of such value. The minimum application value shall be with reference to the issue price of the shares and not with reference to the amount payable on application.

So in an issue priced at Rs 500, the application amount is Rs 100 and the remaining money has to be paid on allotments and calls. In such a case, the application value of Rs 5000-7000 will be arrived at with reference to the issue price of Rs 500 per share.

As such, the minimum application size, to be stipulated in the offer document, will range from 10 shares to 14 shares and not 50 shares to 70 shares.

There has been a change in the proportional allotment procedure too. It has been decided that shares will be allotted on a proportionate basis within the specified categories, subject to a minimum allotment being equal to the minimum application size as fixed and disclosed by the issuer.

Under the existing guidelines, if an issue is oversubscribed, the allotment is to be made in terms of the proportionate allotment procedure, subject to the determination of successful applicants by drawing lots and allotting a minimum of 100 shares per minimum tradeable lot to successful applicants.

The guidelines have been amended to permit reservation on a competitive basis.

The greenshoe option will be now available for all types of public issues, whether book-built or fixed price.

Further, the guidelines have also been amended to permit all pre-IPO shareholders (including promoters), in the case of IPOs, and pre-issue shareholders who have more than five per cent of the shares, in the case of follow-on offerings, to lend their shares for the purpose of the greenshoe option.

In the case of public issue of bonds by designated financial institutions, the guidelines have been amended to provide that once the issue size and oversubscription limits are disclosed in the shelf prospectus, issuers can raise and retain any amount through the tranche issues, subject to this being within the respective limits specified in the shelf prospectus and also subject to the condition that the issuer has to disclose the minimum amount proposed to be raised and the maximum oversubscription proposed to be retained in the shelf prospectus.

New rules

• Only issues of Rs 500 and more can fix face value of shares at below Rs 10, subject to a floor of Re 1 per share. For issues with a share price below Rs 500, the face value of a share has to be Rs 10.

• The minimum share application size value has to be Rs 5,000 to Rs 7,000.

• Greenshoe option for all kinds of issues. Shareholders, who have more than a 5 per cent stake, can lend their shares for market stabilisation.