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SEBI to review Initial Public Offers

January 4, 2012 - Mumbai

Indian market regulator Securities and Exchange Board of India (SEBI) has decided to have a relook at the entire process of raising funds via initial public offerings.

While addressing mediapersons on Wednesday in Mumbai, SEBI, Chairman, U K Sinha said that it is important for people to first understand the rationale behind SEBI's decision.

"The main rationale behind SEBI's decision is that it insists in the larger interest of the market that there has to be a minimum public share holding and the companies who are not in compliance with, that they have been given a timeline till 2013," said Sinha.

Earlier, Sinha informed that a probe revealed misuse or diversion of Initial Public Offering (IPO) proceeds, inadequate documentation and due diligence and possible trading violations on the day of listing of some IPOs.

"SEBI is of the view that if we don't allow the any other avenue for the corporates to meet SEBI's own requirements then the interest of the smaller retail investor will be jeopardized. Keeping that in mind this new window has been allowed but the overall idea is to protect the interest of the small investors and also to reach a standard of meeting a minimum public share holding in the companies," added Sinha.

Earlier, on Tuesday, Sihna announced that SEBI would allow owners of the top 100 companies by market value to raise funds by auctioning their stakes through stock exchanges.

The offer has to be for at least one percent of the company's paid-up capital which should be worth a minimum of 250 million rupees, SEBI said.

Company owners can sell shares through stock exchange deals but they will not be allowed to bid for the shares themselves.

The move will help fund-raising by the Indian government, which has so far been unable to meet its target of 400 billion rupees from share sales in state-run firms this fiscal year that ends in March.

A poor stock market that posted its first annual fall in three years in 2011, combined with risk aversion among investors prompted the government to delay share sale plans of several of its companies, including Oil and Natural Gas Corp and Steel Authority of India Ltd.


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