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Is the new SEBI IPO guidelines in the interest of the retail investor?

Created by : Archana Singh, Relationship Executive, ICICI Bank  | 11 16 2009 07:15:30 +0000
Industry : Retail Chain/LogisticsFunctional Area : Capital Management(Corporate Finance)
Keywords : investment retail sebi ipo
Activity:  384 views;  last activity : 07 06 2010 20:18:09 +0000

The Securities and Exchange Board of India last week proposed changes to the way public share offerings are done, spelt out guidelines for smaller companies to raise capital through share sales.It has introduced the pure auction method of book building in share sales, in which institutional bidders could bid at any price above the floor price instead of restricting them to bid in a band fixed by investment bankers. Allotment of shares would be done to those whose bids are at top prices, starting from the highest bidder. Under the auction method, retail and high net worth investors will surrender their choice to play a part in the price discovery as they would be allotted shares at the floor price discovered in the auction. It will be permissible for the issuer to allot shares to the highest bidder.
http://www.industrialeconomist.com/images/images_jul_2008/critique_sebi.jpg

So, friends, according to you, is the new SEBI IPO guidelines in the interest of the retail investor?

  
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It is a win-win situation for both. It gives the institutional investor the number of shares at the price they want and reduces the hassles of price discovery for retail investors who will now only get a fixed price option. Most jurisdictions require disclosure of balance sheet items on an interim basis whereas in India companies disclose only interim financial results, the board decided to mandate half-yearly disclosure of balance sheet items with audited figures or unaudited figures with limited review
By Archana Singh, Relationship Executive, ICICI Bank  | 11 16 2009 07:28:36 +0000
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Although the new method sounds more democratic for institutional investors, it runs the risk of getting rigged if a few funds corner the shares. So, the regulator should be to the companies to decide on the number of shares it wants to allot a fund.
By Esha Johar, Risk Analyst, Irevna  | 11 16 2009 07:22:36 +0000
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