Merchant bankers will request the capital markets regulator at a 9 March meeting to remove the requirement that shares of companies listed on the small and medium enterprises (SME) platforms of stock exchanges be bought and sold only in lots of Rs.1 lakh, said three bankers aware of the matter.
According to the bankers, removing the lot size requirement will enhance liquidity, bring depth in SMEs and help achieve the regulator’s goal in getting start-ups to list on capital markets. The bankers requested not to be identified.
Securities and Exchange Board of India (Sebi) chairman U.K. Sinha has invited bankers for suggestions on policy measures on primary markets and understanding key priorities of market participants. Key points from the meeting may be discussed at the Sebi board meeting on 12 March. Mint has seen a copy of the invite.
Bankers will also discuss some recent glitches related to ASBA (applications supported by blocked amount), removal of irrelevant information from draft prospectus for initial share sales and paving the way for small investors stuck in companies that have been unsuccessful to migrate to a nationalized stock exchange after Sebi allowed the exits of regional stock exchanges (RSEs).
Bankers said they also expect Sebi to raise concerns on pricing of public issues, as 12 out of 24 public issues since January 2015 are trading below their issue price.
Bankers said the minimum Rs.1 lakh lot-size requirement acts as a hindrance while selling or trading such shares. This has resulted in low participation and liquidity on the SME platform.
“Qualified institutional buyers are not attracted to this segment because it does not suit their criteria, whereas retail investors are virtually barred due to lenient disclosure regime and minimum application and trading lot size requirement,” said one of the three bankers cited earlier.
A retail investor is not allowed to invest more than Rs.2 lakh in any IPO, as per Sebi’s Issue of Capital and Disclosure Requirement (ICDR) regulations.
“Other technical issues such as stock split or bonus allotments that do not add up to the lot size or are disproportionate to the requirement also put additional restrictions on the seller or trader,” the banker said, adding that 100% underwriting in such issues is another concern due to low liquidity.
Sebi had allowed unlisted SMEs with equity capital of Rs.10-25 crore to list on platforms such as BSE SME or NSE’s Emerge. These are open only to high-net-worth individuals and institutional investors
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