SEBI has sought views on changing the notice period of T+2 days “keeping in mind interest of investors as well as sellers”, and the need for halting or suspending trading in concerned stocks on the date of the OFS
Mumbai : Pressed by the government to take steps to ensure greater success of PSU divestments, the Securities and Exchange Board of India sought public comments on halting secondary market trading in such stocks during Offer For Sales and for holding such share sales on Satudays.
Other suggestions, which Sebi said, have been received from “various stakeholders”, include reducing the mandatory notice period for OFSes to one day, from two days currently, and to restrict trading in the concerned stocks within a price band on the day prior to the share sale.
The move follows apprehensions raised by the government in the past, during some divestments through OFS route, that the secondary market price could dip below the proposed OFS price and thus hamper the share sale process.
OFS is the easiest and fastest route for sale of shares in an already-listed company and the government has also used this route for sale of its minority stakes in case of 13 PSUs so far.
The government had, however, requested Sebi to further ease the norms for OFS by way of halting secondary market trading and other steps to boost its divestment programme, under which it aims to raise Rs 41,000 crore from sale of minority shares in the current fiscal.
The public comments have been sought till April 18 on a host of suggestions, which also include providing the retail investors an option to bid at cut-off price in all OFS. The OFS mechanism presently provides that seller may give option to retail investors to place price bid or place bid at cut-off price.
“Recent experience with OFS has shown that some retail investors bid at high prices, on the assumption that they would get allotment at cut-off price. Therefore, it is suggested to make it mandatory for sellers to provide option to retail investors to place price bid or place bid at cut off price for better retail participation,” Sebi said in its discussion paper.
On suggestion for trading halt, Sebi said that “opponents argue that halts are unnecessary barriers to price discovery and do not actually reduce volatility in trading following the lifting of the halt.
“For example, if fundamental information arrives at the time of the trading halt, the price adjustment process is delayed. This may in turn increase price uncertainty because no information is transmitted through trading when there is a halt.
“In addition, by preventing investors from trading during a halt, investors may not be able to liquidate their position, if so required by them for sale of shares using OFS through stock exchange mechanism.”
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REC stake sale on Wed
New Delhi : Government will sell 5 per cent stake in Rural Electrification Corporation on April 8 to mop up close to Rs 1,600 crore, marking the first disinvestment of the current fiscal. Taking the offer for sale (OFS) route, government will sell over 4.93 crore REC shares.
“The offer shall take place during trading hours on a separate window of the stock exchanges and shall commence on April 8,” REC said in a filing to the BSE.
Shares of REC closed at Rs 335.60, down 0.52 per cent over previous close on the BSE. The government is likely to fix the floor price for the OFS at a discount to the current market price.
As much as 20 per cent of the offer size would be reserved for retail investors, who can bid for shares worth Rs 2 lakh. They would be offered shares at 5 per cent discount to issue price. Besides, 25 per cent of the offer would be alloted to mutual funds and insurance companies.
The government has budgeted to raise Rs 41,000 crore through minority stake sale in 2015-16.
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