Have asked government to allow fractional ownership of shares in India, says SEBI chief

Have asked government to allow fractional ownership of shares in India, says SEBI chief Madhabi Puri Buch

The Securities and Exchange Board of India (SEBI) has written to the government to allow fractional ownership of shares in the domestic equity market as enabling such a facility would require changes in the Companies Act.

On Thursday, SEBI chairperson Madhabi Puri Buch said that the capital market watchdog has already written to the relevant ministry to look into the matter and see if the necessary changes in the legislation can be done.

“Since the Companies Act is under deliberation, we have requested the ministry, so let’s see what comes out,” said SEBI chairperson Madhabi Puri Buch while speaking to the media on Thursday after the board meeting.

Fractional ownership refers to a mechanism wherein an investor can buy or sell a fraction of the shares as well – a feature that is already available in some of the markets globally including the US.

Simply put, an investor will be able to buy half a share or just one-tenth – depending on the permissible limits allowed by the regulatory framework – in case the price of one share is too high in absolute terms but the investor is still very bullish in terms of the outlook or potential gains.

Also Read: SEBI's plans to introduce fractional shares may get delayed: Report

Interestingly, the concept of fractional ownership is not alien to Indian investors, especially for those who have a direct exposure to foreign equity.

Since the pandemic year of 2020, an increasing number of Indian retail investors have been buying shares of companies listed on the US bourses and given the high prices in absolute rupee terms, many prefer to buy in fractions rather than one share.

For instance, buying one share each of the popular FAANG group – Facebook (now Meta), Amazon, Apple, Netflix, and Google (now Alphabet) – at current prices would cost a little over Rs 1.5 lakh.

Hence, many investors buy fraction of the shares and thereafter increase their exposure by buying more fractions in a staggered manner.

In the Indian market, MRF (Rs 1.25 lakh), Kaycee Industries (Rs 60,628), The Yamuna Syndicate (Rs 60,300), Honeywell Automation India (Rs 57,052.05), and Page Industries (Rs 40,059) are among the most expensive stocks in terms of absolute value. If fractional ownership is allowed then an investor can buy a fraction of these shares as well.

Further, there are more than 20 companies whose respective stock prices are more than Rs 10,000 apiece.

Also Read: Small and medium REITs: Sebi launches new framework for fractional ownership of real-estate

Incidentally, fractional ownership as a concept is already allowed in some of the other asset classes including real estate wherein one can participate and own parts of a larger real estate property through REITs.

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