In yet another move to up the role of the retail investor in the stock market the Securities and Exchange Board of India (SEBI) has recently amended the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2010, to increase the extent of participation allowed by retail investors.
At the same time SEBI has added to the built-in restrictions on promoter participation in the preferential allotments of an issuing company and also expanded the definition of a qualified institutional buyer. These regulations apply to the following issues: public issues, rights issues, preferential issues, bonus issues by a listed issuer, qualified institutional placements by listed issuers and an issue of Indian depository receipts.
The amendment expands the application limit for an individual retail investor in an IPO from Rs100,000 (US$2,185) to Rs200,000. The amended definition states that a retail individual investor or shareholder is a person who applies or bids for securities for a maximum value of Rs200,000 and not Rs100,000. This will translate into an increase in the investor base for IPOs as more investors will now fall within the 35% reservation available to retail investors.
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The legislative and regulatory update is compiled by Nishith Desai Associates, a Mumbai-based law firm. The authors can be contacted at nishith@nishithdesai.com. Readers should not act on the basis of this information without seeking professional legal advice.
