The SEBI-appointed Primary Market Advisory Committee will review the basis of allocation for retail investors in initial public offers when it meets on January 16.
The current rule, operational since October 2012, ensures that all retail applicants are allotted at least the minimum application size, subject to availability of shares in the aggregate.
If there are an inadequate number of shares to ensure this, then allotment is done through lottery. The remaining shares for retail investors are allotted on a proportionate basis.
Prior to 2012, the minimum application/bid size for retail investors was in the range of Rs 5000-7000, against Rs 10,000-15,000 now. Allotment to retail investors used to happen on a proportionate basis in case of oversubscription, such that any entitlement on proportionate basis less than the minimum application size was rejected. This process was skewed in favour of applicants making higher value bids, prompting SEBI to revise the rule.
SEBI is of the view that more number of retail investors are being allotted shares in the new rule than in the earlier rule, going by the allotment in the RBL Bank public issue.
Also, SEBI feels investors making low value bids are getting more proportion of shares under the revised procedure compared to the pre-revised procedure.
Still, it has sought the views of the Committee on whether there is a need to review the basis of allotment norms for retail investors.
Also read: SEBI may tweak preferential issue norms to accomodate banks