As IPOs do badly, Sebi may let cos raise funds via convertible bonds
29 Oct 2013 10:47 PM GMT
As IPO market still remains tepid, forcing companies to borrow costly funds from other sources, capital markets regulator Sebi on Monday said that it is looking at allowing them to issue convertible debentures to raise money.
'The Primary Market Advisory Committee (PMAC) of Sebi is currently debating an alternative route to allow corporates to issue convertibles (debentures), which after certain time must be converted into either equity or other debt instruments,' Sebi chairman UK Sinha told reporters on the investor protection in capital markets here.
The IPO market has been going through difficult times for quite some time and there were very few IPOs that raised money in the current fiscal. While it has been difficult for companies to raise money through IPOs, by and large, investors have also not benefited by investing in the stock markets.
Sinha pointed out that nearly two-thirds of IPOs floated during the last three years are quoting below their issue price.At this stage, Sebi has not been able to finalise the stand whether safety net should be introduced or not, he said.
The proposed safety net mechanism for investors has generated strong opposition from various stakeholders. Sebi will consider these views thoroughly, Sinha said.
'People are saying equities are risk instruments, so, why provide safety. But our current regulations do provide for voluntary safety net,' he added.
Under the proposed safety net scheme, if the market value of the shares falls below the issue price at any time during first six months of the listing, promoters will have to buyback shares at the sale price from original allottees.
However, the buyback is proposed to be subject to a maximum of 1,000 equity shares per allottee.Sebi, in September 2012, had floated a discussion paper on safety net and collected feedback on it from the market.
The government had recently issued an Ordinance empowering Sebi with more powers. The Securities Laws (Amendment) Ordinance 2013 Bill is expected to be passed by Parliament in the upcoming winter session.A second Ordinance was issued on 19 September giving greater powers to Sebi to check illicit investment schemes and other market manipulations, as the Bill could not be passed during the last monsoon session.
The Securities Laws (Amendment) Second Ordinance, 2013 would amend the Sebi Act, the Securities Contracts (Regulation) Act and the Depositories Act and these amendments would now have to be passed by Parliament in the Winter session. The first Ordinance was promulgated on 18 July, followed by introduction of the Securities Laws (Amendment) Bill, 2013, in Parliament during its last session. However, this Bill to replace the first Ordinance could not be passed during the last session, which ended on 7 September, thus requiring the need for a second Ordinance.
As per the amended law, Sebi can regulate any money pooling scheme worth Rs 100 crore or more and attach assets in cases of non-compliance, while Sebi chairman has been authorised to order 'search and seizure operations' in such cases.
Meanwhile, Sinha said it is working on curbing the misuse of social media in market manipulation.As social media sites, mobile messaging applications and other web-based platforms are emerging as avenues to lure investors, Sebi has enhanced surveillance to check for any fraudulent investment schemes being run through them.
'The Primary Market Advisory Committee (PMAC) of Sebi is currently debating an alternative route to allow corporates to issue convertibles (debentures), which after certain time must be converted into either equity or other debt instruments,' Sebi chairman UK Sinha told reporters on the investor protection in capital markets here.
The IPO market has been going through difficult times for quite some time and there were very few IPOs that raised money in the current fiscal. While it has been difficult for companies to raise money through IPOs, by and large, investors have also not benefited by investing in the stock markets.
Sinha pointed out that nearly two-thirds of IPOs floated during the last three years are quoting below their issue price.At this stage, Sebi has not been able to finalise the stand whether safety net should be introduced or not, he said.
The proposed safety net mechanism for investors has generated strong opposition from various stakeholders. Sebi will consider these views thoroughly, Sinha said.
'People are saying equities are risk instruments, so, why provide safety. But our current regulations do provide for voluntary safety net,' he added.
Under the proposed safety net scheme, if the market value of the shares falls below the issue price at any time during first six months of the listing, promoters will have to buyback shares at the sale price from original allottees.
However, the buyback is proposed to be subject to a maximum of 1,000 equity shares per allottee.Sebi, in September 2012, had floated a discussion paper on safety net and collected feedback on it from the market.
The government had recently issued an Ordinance empowering Sebi with more powers. The Securities Laws (Amendment) Ordinance 2013 Bill is expected to be passed by Parliament in the upcoming winter session.A second Ordinance was issued on 19 September giving greater powers to Sebi to check illicit investment schemes and other market manipulations, as the Bill could not be passed during the last monsoon session.
The Securities Laws (Amendment) Second Ordinance, 2013 would amend the Sebi Act, the Securities Contracts (Regulation) Act and the Depositories Act and these amendments would now have to be passed by Parliament in the Winter session. The first Ordinance was promulgated on 18 July, followed by introduction of the Securities Laws (Amendment) Bill, 2013, in Parliament during its last session. However, this Bill to replace the first Ordinance could not be passed during the last session, which ended on 7 September, thus requiring the need for a second Ordinance.
As per the amended law, Sebi can regulate any money pooling scheme worth Rs 100 crore or more and attach assets in cases of non-compliance, while Sebi chairman has been authorised to order 'search and seizure operations' in such cases.
Meanwhile, Sinha said it is working on curbing the misuse of social media in market manipulation.As social media sites, mobile messaging applications and other web-based platforms are emerging as avenues to lure investors, Sebi has enhanced surveillance to check for any fraudulent investment schemes being run through them.
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