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Sebi Eases Share Auction Mechanism

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Market regulator Sebi on Tuesday decided to make it mandatory for top 500 listed companies to facilitate e-voting for shareholders, besides putting in place a mechanism that would plug loopholes in audit of companies.

In a statement issued after its board meeting in Mumbai, the Securities and Exchange Board of India (Sebi) said top 500 listed companies, based on market capitalisation, would have to provide for electronic voting facility to shareholders.

"The same would be implemented in a phased manner. To begin with, it would be mandated for top 500 listed companies at BSE and NSE based on market capitalisation. Listed companies may choose any one of the agency which is currently providing the e-voting platform," Sebi said.

Also, in order to smoothen the process of disinvestment, the capital market tweaked norms governing offer for sale (OFS) and institutional placement programme (IPP).

IPP and OFS are the two new share sale tools introduced by the regulator in January this year, especially to help corporates increase their public float.

According to experts, reduction of the time gap will help companies conduct share sales in more tranches depending upon market conditions and investor appetite.

The regulator has decided to relax the mandatory 12-week time gap requirement between two consecutive Offer for Sale (OFS) or Institutional Placement Programme (IPP).

However, a gap of two weeks between two successive OFS or IPP should be maintained, it said, adding, this would also be applicable on promoters who have already offloaded their shares through OFS or IPP.

The reduction in the time gap will help companies to offload shares in more than one tranches depending on market conditions.

The board also decided that indicative price should be displayed during the last 60 minutes of the close of bidding session irrespective of the book being built.

However, as per the existing provision, bids were invited without disclosing indicative price during the trading hour.

The display of indicative price could also lead to bidding happening at the last one hour of trade.

Qualified Audit Reports
Besides, in order to enhance the quality of financial reporting done by listed entities companies Sebi would create a Qualified Audit Report Review Committee (QARC) represented by accounting regulator ICAI and stock exchanges.

The committee would guide Sebi in processing audit reports where auditors have given qualified audit reports.

Now, companies would have to submit annual audit reports to stock exchanges along with two forms -- Form A and Form B -- after preliminary scrutiny of which exchanges will send qualifications to the Committee.

In cases wherein significant qualifications are raised and explanation given by company is unsatisfactory, the Committee would forward it to the Financial Reporting Review Board of the Institute of Chartered Accountants of India (ICAI-FRRB)

If the ICAI-FRRB decides that the qualification is justified, SEBI may mandate a restatement of the accounts of the company and ask it to inform the shareholders by making the announcement to stock exchanges.

Further, the regulator said it has modified the minimum subscription requirements for infrastructure companies coming out with IPOs.

"The minimum subscription shall not be less than 90 per cent of the offer, subject to allotment of minimum 25 per cent or 10 per cent, as the case may be, of the securities offered to the public," Sebi said.

The regulator has also decided to relax the mandatory 12-week time gap requirement between two successive Offers for Sale (OFS) or Institutional Placement Programmes (IPP).

The board also decided that indicative price should be displayed during the last 60 minutes of the close of bidding session irrespective of the book being built.

However, as per the existing provision, bids were invited without disclosing indicative price during the trading hour.

With regard to modification or cancellation of bids, the board decided that this can be done in the last 60 minutes instead of last 30 minutes of the trade.

The minimum size of the offer should be Rs 25 crore.

The decision will also help the government to expeditiously offload its stake in public sector companies and raise funds for achieving the disinvestment target of Rs 30,000 crore for the current fiscal.

With regard to modification or cancellation of bids, the board decided that this can be done in the last 60 minutes instead of last 30 minutes of the trade.

The minimum size of the offer should be Rs 25 crore.

However, the size of offer can be less than Rs 25 crore so as to achieve minimum public shareholding in a single tranche, it said.

Such changes have been done so that the companies can achieve the minimum 25 per cent public holding guideline by June 2013.

All listed companies are required to have at least 25 per cent public holding by June 2013 while in case of state-owned company the limit is 10 per cent to be met by August 2013.

There are 12-13 PSU companies which have to meet the public holding guidelines can benefit from the changes in norms.

SEBI also said that the institutional investors shall have the option of applying with 100 per cent upfront margin in cash or with an adhoc margin of certain lower percentage to be determined by the exchanges.

The companies which have conducted share sales through these two new routes include ONGC, Wipro, Godrej Properties and DB Corp.

(PTI)


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