Separate trading platform for SMEs, freedom on issue price
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Last Updated: Tuesday, November 10, 2009, 00:20
Mumbai: Market regulator SEBI on Monday allowed stock exchanges to have separate trading platforms for small and medium enterprises, relaxed the criteria for their initial open offers and follow on offers by all companies.

The market watchdog allowed firms to go for pure auction for pricing of their issues for institutional investors instead of the current practice of giving a price band.

The board also put an upper quota limit of Rs one lakh that each employee of a company can get in a public issue and asked firms to disclose their balance sheets half-yearly.

"It makes sense to allow the present exchanges to do it (set up the SME trading platform). This will help the process to be cost effective to set up the new trading platform for SMEs... It need not have to be a separate exchange," Sebi Chairman C B Bhave told reporters here on Monday.

SME firms will also be exempted from the eligibility norms like track records on profit applicable to other firms to come out with issues, he said.

Bhave said only those firms with a maximum paid-up capital of Rs 25 crore would be allowed to trade on the separate trading platforms.

A minimum Rs 10 crore of capital is required, if these firms list their shares on main boards of NSE and BSE, he said.

Giving more choice of pricing shares in a book building form to companies, Bhave said the new mechanism of giving only floor price to institutional bidders will be applicable to follow-on public offer in the initial stages.

This method would not have a price band as is the practice now for institutional bidders.

However, non-institutional investors like retail, high networth individuals and employees would have to be allotted shares at the floor price, if companies choose this method, Bhave said.

"There was a demand from the market that instead of present practice of declaring floor price and price-band, if only floor price is given, pure auctions should be allowed to take place in the public issue. Board decided that the issuer can pure auction, (but ) this will be limited to Qualified Institutional Bidders," Bhave said.

He pointed out if the issuer desires to place a cap either in terms of number of shares or percentage to issued capital of the company so that a single bidder does not garner all shares on offer and there is wider distribution, the same may be permitted, he said.

Sebi also decided to make it mandatory for listed Indian companies to come out with half-yearly disclosure of balance sheet, audited or unaudited.

This has been done "taking note that internationally most jurisdictions require disclosure of balance sheet items on an interim basis," Bhave said.

On quota for each employee in public issues, Bhave said it has been decided to put a ceiling of Rs 1 lakh for this purpose.

Currently, there is no ceiling for each employee, but employees as a group could be alloted shares up to 10 percent of the issue size. SEBI also changed this norm to 5 percent of the post-issued capital, Bhave said.

Relaxing norms for follow-on offers, the regulator reduced the average market capitalisation of listed Indian companies to Rs 5,000 crore from the current Rs 10,000 crore for these issues.

The market regulator also extended the relaxation on the disclosure norms given for rights issues to FPOs as well. With this, companies going for FPOs now require to give only the audited accounts for last financial year, instead of five years restated financials required currently.

The watchdog made it mandatory to disclose only limited review of audited results within 45 days of the end of the quarter as against 30-days earlier.

Sebi also reduced timeline for disclosure of audited annual results from 90-days to 60-days for those companies, which opt to submit annual audited results on a standalone basis.

Post Satyam fraud, Bhave said Sebi completed the peer review auditing of 47 companies out of total 51 from BSE and NSE, but did not found any discrepancies in their accounts.

SEBI also decided to accord status of qualified institutional buyer to insurance funds, set up by armed forces such as army group insurance fund.

Bhave said listed companies will now have an option to submit their consolidated financial statements as per global accounting standard, IFRS.

However, such entities will have to continue to file their standalone financials as per Indian standards in line with requirements under the Companies Act.

On the extension of trading hours, Bhave said that exchanges are free to decide on the trading hours between 9 am and 5 pm.

"We have asked exchanges to decide. Practically, they have to decide," he said.

Bureau Report

First Published: Tuesday, November 10, 2009, 00:20

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