The Hindu Business Line : SEBI panel moots simultaneous equity offering

A SEBI-appointed group has suggested simultaneous offering and listing of equity through public issue in domestic market and Depository Receipts (DRs) in the international market at a similar price.

But the committee has suggested the offering in the international market will have to be over and above the 10 per cent or 25 per cent prescribed limit for the domestic market by the SEBI.

The report on "Simultaneous equity offering in Indian and International markets" said the share would have to be offered through the book building process with a common book for domestic shares and DRs.

In case the SEBI approves these suggestions, it will pave the way for public sector companies such as BPCL and Nalco that are planning to offer both in the domestic and international markets.

The group has said companies should be allowed the flexibility of indicating a price band of up to 20 per cent, instead of the present requirement of mentioning a floor price during the book-building process. Companies can also have the flexibility to revise the price band till one day before the last day of the closure of the book.

The book in Indian markets will be built on the NSE and the BSE platforms as per the SEBI guidelines while the international book will be built as per the international market practices. These two books will be synchronised for the purpose of final pricing.

It has also suggested that shares from one market can be transferred to other market (fungibility of shares) depending on the under subscription in a particular market.

The report says this will enable the right supply of stock in each of the markets. "Without this flow-back provision, there could be situations, where there will be an over-supply in the domestic offering leading to a pressure on the price and an under-supply overseas, leading to a marginal premium for shares in the global offering or vice-versa," it said.

But for all this, Foreign Investment Promotion Board (FIPB) approval will be required for the entire offering size (domestic and global).

However, one committee member has said the fungibiliy at the time of offering should not be allowed.

In case of oversubscription, not more than 15 per cent should be offered in each market over the prescribed limit.

For deciding on the headroom for reverse fungibility, the final DR size as announced by book runner should be considered.

The report has also said that since most of the DR would be issued to institutional investors, the present 60 per cent limit to quasi-institutional investors should be removed in the domestic offering.

In turn, suggestions have been to have minimum allocation of 15 per cent to high net worth individuals and corporate and 25 per cent to retail investors on the basis of final domestic offering size. Flow back of shares from one category to other will be permissible as per the extant SEBI guidelines.

For simultaneous listing in both the markets, the report has suggested that the SEBI to issue e-IPO guidelines. This suggestion has been made as in most of the international markets the shares are listed 2-3 days after the closure of the issue while in India the listing takes place around 16 days after the issue has closed. The committee feels e-IPOs will reduce the listing time from 16 to just 6 days.

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