Posts Tagged ‘assets and liabilities’

SEBI Allows Auctions for QIBs in FPOs :)

SEBI Allows Auctions for QIBs in FPOs

Market regulator, SEBI has introduced a significant change in the way institutional bidders invest in follow-on public offers by allowing allotments through auctions.

 

The Securities and Exchange Board of India (Sebi) has amended the Issue of Capital and Disclosure Requirements Regulations (ICDR) to allow pure auctions for qualified institutional investors (QIBs) in follow-on public offerings to begin with.


The method may be later extended to initial public offerings.

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Under the new method, bidders will be free to bid at any price above the floor price.

At present, allotments are made at the floor price.

Retail investors, however , will be allotted shares at the floor price.

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The board also decided that the issuer is free to place a cap either in terms of the number of shares or percentage to issued capital of the company so that a single bidder does not garner all the shares on offer, ensuring a wider distribution of shareholding.

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Jagannadham Thunuguntla, Equity Head,  SMC Capitals, said this means an institutional investor can continue to bid above the floor price and the QIB allotment will be made to the highest bidder.


“The intent is to enable companies to mop up more funds. Earlier, even when there were huge subscriptions and huge demand for an issue, the company could not get more money. This becomes more relevant in the context of the recently announced divestment plans and FPOs by the government for public sector units,” he said.

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Auction for QIBs is welcome as it would allow risk-taking entities and not just the promoters to be a part of the price discovery process, other analyst said.


A SEBI release issued after the board meeting also said the minimum market capitalisation required by listed firms to sell shares in follow-on offerings has been halved to Rs.5,000 crores  from Rs 10,000 crore.

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Moreover, the market regulator has also made it a mandatory that all listed companies would have to furnish audited or un-audited balance sheets on a half-yearly basis within 45 days from the end of the quarter instead of the current yearly basis.

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This would imply that Indian companies will be required to disclose balance sheet items.


Shareholders would be able to access the statement of assets and liabilities of the company and its solvency position on a half-yearly basis.


Shareholders would receive immense help in making informed investment decisions now and would be in better position to assess the financial health of the companies, with the implementation of this SEBI regulation of mandating frequent disclosure of the asset-liability position of companies by companies.

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