COMPANY LAW
| Public issues: retail investment limit proposed to be doubled to Rs. 2 lakh Thu, 19 Aug 2010 |
| The Hindu Public issues: retail investment limit proposed to be doubled to Rs. 2 lakh NEW DELHI: Market regulator Securities and Exchange Board of India (SEBI) on Wednesday proposed to double the investment limit for retail investors to Rs.2 lakh in public issues, a move that will enable individuals to aggressively participate in primary issues of companies. “It is proposed to ... enhance the limit prescribed for defining a retail individual investor in a public issue from the existing Rs.1 lakh to Rs.2 lakh,” the SEBI said in a draft regulation on which it invited comments from stakeholders by September 3. The current limit of Rs.1 lakh for retail investors was fixed over five years ago in March 2005. The limit for retail investors was Rs.50,000 before it was raised to Rs.1 lakh. Giving justification for its proposal, SEBI said the limit for retail investors needed to be enhanced in view of the increase in inflation rate from 4 per cent in 2005 to around 12 per cent now and rise in the BSE Sensex from 8000 to about 18000 during the same period. “This means that the retail individual investors now buy a lesser number of securities with Rs.1 lakh than they would buy with the same amount in 2005,” it added. “It is a very timely and logical step. The lukewarm public response to some recent offers may also have made SEBI put the proposal,” SMC Capitals equity head Jagannadham Thunuguntla said. “The proposal will also increase competition among retail investors as we will see pressure on small retailers who put in Rs.10,000 or Rs.20,000 and more participation of those in the Rs.1.10-2-lakh category,” Mr. Thunuguntla added. At present, most of the applications from retail individual investors have come in the size of Rs.75,000 to Rs.1 lakh, SEBI said, pointing out that the segment seemingly had the capacity to contribute more. As about 35,000 to 70,000 retail investors participate in an issue, it becomes difficult for companies coming out with large issues to seek adequate subscription for quota meant for individual investors. Under Issue of Capital and Disclosure Requirements (ICDR) Regulations, 35 per cent of the public issue has to be allocated to retail individual investors. SEBI said that for an issue size of Rs.4,000-6,000 crore, the limit of Rs.1 lakh would mean that it must receive a minimum of 1.50-2-lakh applications from retail individual investors to fill in the 35 per cent allocation. This could be a “daunting task” even in the case of well oversubscribed issues, SEBI said, while making a case for doubling the investment limit to Rs.2 lakh |
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