Sebi to come out with IPP guideline in next 3-4 days

Capital market regulator Sebi has said it would issue guidelines next week for private placement of shares through auction route to institutional investors by promoters.

"IPP (Institutional Placement Programme) guideline would come in next 3-4 days. Work has been done with regard to changes in regulation. Those changes would be done in next 3-4 days," Sebi Chairman U K Sinha said.

IPP would allow promoters to sell up to 10 per cent of their capital through auction to institutional investors. Opening of this additional route would facilitate the disinvestment programme of the government in current market conditions.

The government is running against time to meet its ambitious disinvestment target of Rs 40,000 crore for the current fiscal.

"This method can be used only for the purpose of complying with minimum public shareholding requirements under Securities Contract Regulation (Rules) or SCRR, either by way of fresh issue of capital or dilution by the promoters through an offer for sale," Sebi had said earlier this month after its board approved a new IPP route.

Using this method, public shareholding can be increased by 10 per cent or lesser percentage as is required to comply with the minimum public shareholding requirement, it had said.

As per government norms, at least 10 per cent of the shareholding in all listed state-owned companies should be with the public, while in the case of private sector companies, the minimum public shareholding should be 25 per cent.

Sebi had said under the IPP mode, companies would be required to simultaneously file a red herring prospectus/prospectus with SEBI, the Registrar of Companies and stock exchanges.

Under the new mechanism, the offer would be restricted to Qualified Institutional Buyers (QIBs), it said. A minimum of 25 per cent of the offer would be reserved for mutual funds and insurance companies.

The company or promoter would announce an indicative floor price or price band at least one day prior to the opening of the offer, it had said.

Issuers shall endeavour to maximise the number of allottees in order to ensure wider distribution of shares, it had said, adding that there shall be at least 10 allottees in every IPP issuance. Furthermore, no single investor shall receive allotment for more than 25 per cent of the offer size.

The regulator also allowed the stock exchange to offer a separate window for the purpose of such sales. The duration of this window would co-exist with the normal trading hours, it had said.
Allotment would be done either on price priority or a clearing price basis proportionately and would be overseen by the exchanges, it added.

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