Sebi retains 100% upfront margin for OFS

Moneycontrol Bureau

Market regulator Securities and Exchange Board of India or Sebi has decided to continue with 100 percent upfront margin for OFS.

Sebi had created two new routes——offer for sale (OFS) and institutional placement programme (IPP)—to help firms meet the public holding norms in February of last year. Thereafter, in August, the regulator allowed firms to use rights and bonus issue routes to enhance the public holding.

Currently, institutional investors bidding for shares through the OFS route are required to pay the entire amount upfront. Reports had suggested that the regulator may relax this norm and reduce the margin requirement from such investors, while restricting any downward revision of the bids placed by them.

The Sebi board had met today to discuss minimum public holding and safety net. “There will be earlier mechanism of 100 percent upfront margin. Institutions settlement can happen on T+1. The earlier requirement of 25 percent margin is not mandatory. Institutions can come without any upfront margin,” Sebi chief UK Sinha told reporters.

Sinha also warned against violation of public shareholding norms. He also said the government is committed to ensuring that public sector companies comply with the minimum public shareholding norms and will not be seeking any extension.

As per Sebi norms, private sector firms need to have a minimum public shareholding of 25 per cent by June, while a threshold of 10 per cent is required by PSUs by August.

"I can share with you that we have received confirmation from the government that it is very keen to complete the transactions with regard to Public Sector Undertakings (PSUs) and they will not be seeking any extensions," Sinha told  reporters here after its Board meeting.

Promoters of nearly 190 companies are yet to bring down their shareholding to the desired level to meet the guidelines, although Sebi has already provided various options to meet these norms.

Noting that good progress has been made by listed companies in complying with the norms, Sinha said that Sebi was "very hopeful that companies would be able to do it".

He said Sebi board today discussed the actions it could take in case listed companies fail to comply with the minimum public shareholding norms.

Sinha added, "What consequences happen if somebody decides to violate Sebi instructions is a matter which is legal and should be well known. It is well known.

"If you decide to violate, for example, the listing agreements, if you decide that you will not follow ICDR regulations, then the consequences are very very clear. Sebi is serious about public shareholding. Sebi is willing to consider any practical suggestions pertaining to this."

He also noted that there has been no spurt in delisting of companies.

"Sebi received lot of requests and suggestions from industry, experts to make delisting easier but unfortunately we cannot agree to those suggestions," he said.

(With inputs from PTI) 

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