Issuers were never asked to go only for French Auction: SEBI
Market regulator SEBI has said it never asked companies to use only the French Auction route for public issues, which failed to elicit the desired response from investors.
"We have not prescribed French Auction. It's a choice of the issuer," Securities and Exchange Board of India (SEBI) Chairman C B Bhave said here.
He said if issues are not getting desired benefits from French Auction, the issuers can always change it.
The French Auction route did not yield the required results for the National Thermal Power Corporation Ltd (NTPC) and the Rural Electrification Corporation Ltd (REC) issues.
The poor response to NTPC and REC issues has prompted mineral giant National Minerals Development Corporation to contemplate using the book-building process for deciding the price band of its forthcoming follow-on public offer.
In the French Auction route, permitted by SEBI a few months ago, institutional investors only get the minimum bidding price of the issue while the non-institutional investors like retail buyers get the issue at the floor price.
In the book building route, companies give a price band for their public offer. Investors are asked to bid within the band and even non-institutional investors get the shares at the price where the maximum bids have come.
Last month, two power PSUs NTPC and REC came out with FPOs following the French Auction model.However, the NTPC issue was subscribed only 1.2 times, leading many to blame the French Auction route for the poor show.
The secondary issue from India's largest power utility NTPC opened on February 3 and closed on 5 and scraped through with institutional buyers as retail investors kept off. Retail investors even cold-shouldered the REC FPO.
REC had hit the markets with its public issue of 17.17 crore shares at a floor price of Rs 203 per piece. The Rs 3,529.94 crore follow-on public offer was open for subscription between February 19 to February 23.
