New IPO Payment Norms By SEBI - Aug 06 , 2008

Sebi on Tuesday announced an alternate payment system for public issues to ensure the process works smoothly. In this the retail investors will not have to deposit money upfront while applying for shares. This will be launched by August-end as a pilot project. While both the current system of payment through cheques and alternate system would co-exist, as per the Sebi chairman.

The new payment system called additional mode of payment through Applications Supported by Blocked Amount, will exempt retail investors from making full advance fees and the amount to be retained in bank accounts till the completion of allotment.

The alternate payment system is dependent on 'Self-Certified Syndicate Banks', which would accept the application of retail investors.

Under the scheme, the money an investor pays while applying for an IPO will remain in his bank and earns interest till the allotment is made. These banks will block the fund to the extent of bid amount, upload the details in the electronic bidding system of BASE or NSE and then unblock once the basis of allotment is finalized and transfer the amount for allotted shares to the issuer.

New Rules For IPO By SEBI - July 31, 2008

SEBI has finalized the guidelines for retail investors for investing in IPO in which they only have to pay to the extent of shares allotted to them and not 100% upfront advance for shares.

The payment system known as Application Supported by Blocked Amount (ASBA) that will require retail investors to bid at a cut-off price and to apply through self-certified syndicate banks (SCSBs), in which they hold accounts.

SEBI on Wednesday issued a circular that highlighted the eligibility criteria for an investor and also identified the roles and responsibilities of other intermediaries, registrars, merchant bankers and stock exchanges in the ASBA process.

Case Against Anagram Relating To IPO Scam, Settled - July 22 , 2008

The Securities and Exchange Board Of India (SEBI) on Monday settled a case against Anagram Securities relating to alleged financing of key operators in IPO scam. Charge against Anagram Securities was that it acted as a financier to the key operators for making applications for public offers in fictitious and benami names during 2003-05.

The case has been settled through a consent order passed by the SEBI, but it does not restrict the market regulator from taking enforcement action. SEBI can reopen the pending case, if it finds any representation made by the firm in the consent proceedings are to be untrue or it has breached any of the clauses of undertakings during the proceedings.

The market regulator passed the order on the recommendations of its High Powered Advisory Committee.

MCX Gets The Approval From SEBI For Its IPO

Financial Technologies (India) Ltd's promoted Multi Commodity Exchange of India (MCX) has received confirmation from the market regulator Securities and Exchange Board of India (SEBI) for its Initial Public Offer.

Financial Technologies (India) in February had filed the draft prospectus with SEBI.

Investors Can Keep IPO Money Till Allotment

Mumbai: Investors no longer have to wait for weeks for refund of their IPO application money.

The application money earmarked for an IPO will now remain in the applicant’s bank account till the allotment is finalised, thus eliminating the refund process, SEBI said on Tuesday, addressing a long-standing grouse among investors, particularly in the retail segment.

“The modalities in this regard would be worked out separately,” said a news release from SEBI, issued after its Board met on Tuesday.

“The Board approved, in principle, the concept of making lien on bank account as an alternative mode of payment in public/rights issues.”

This means that the money marked for the IPO will not be used for any other payment obligation during that period.

At the same time, the applicant will enjoy the interest payable on the amount.

This would also reduce the burden on registrars and merchant bankers. But bankers to the issue can no longer enjoy the floating interest, said officials associated with the IPO process.

Most important of all, investors would not have to wait for their refund money. It also ensures that a liquidity crisis such as that of January 2008 does not occur again.

At that time, many investors were unable to buy scrips which were at attractive lows, as their money was locked up in the Reliance Power and the Future Capital IPOs. Nor could they meet their margin money requirements.

PMs – No pooling

The SEBI Board also decided to disallow the pooling of investors’ money by portfolio managers.

“Portfolio managers should not float a scheme or pool the resources of the client in a way which is akin to mutual fund activity,” said SEBI.

They have been allowed six months’ time to convert their operations managed on pooled basis to individual basis.

The Board also decided to enhance the minimum net worth requirement for registration of portfolio managers from the existing Rs 50 lakh to Rs 2 crore in a phased manner.

SEBI Revises Payment Process For IPOs

Mumbai: India's market regulator has changed the payment process for subscribing to initial public offers and rights issues.

Under the new process, the application money will remain in the bank account of the applicant till allotment is finalised, the Securities and Exchange Board of India (SEBI) said in a statement after its board meeting late on Tuesday.

Currently, the money is debited from the bank account, and based on the number of shares allotted the excess money is returned. The regulator said the new system would eliminate the refund process.

The modalities of the entire process will be worked out separately, it said.

The SEBI board also increased the minimum net worth requirement for registration as a portfolio manager to Rs 2 million from Rs 5 million.

It said existing portfolio managers with lower net worth will have to increase it to at least Rs 10 million within six months, and to the new prescribed limit in the next six months.

SEBI said portfolio managers will not be allowed to pool the resources of clients like mutual funds and must keep assets of each client separately.

Portfolio managers working on pooled basis have been given six months to convert their operations to individual basis, the statement said.

DHC Restrained Ajanta Manufacturing From Proceeding With Public Issue

New Delhi: The Delhi High Court(DHC)on Friday restrained Ajanta Manufacturing Ltd, manufacturer of Orpat and Oreva brands of watches, from proceeding with its proposed public issue.

Justice B D Ahmed passed the interim order on an application filed by Ajanta India Ltd, an FMCG company, seeking an order to restrain Ajanta Manufacturing Ltd (AML) from going ahead with the issue, for which it has recently filed a draft red herring prospectus (DRHP) with SEBI.

The application filed through advocate Pratibha Maninder Singh also sought a direction to AML to withdraw its DRHP.

Singh contended that AML should change its company's name to one that should not include the word 'Ajanta' as Ajanta India Ltd has an order in its favour from the HC restraining AML from doing so.

Singh said that Ajanta India recently came to know that AML filed a DRHP on April 15, 2008 for a public issue under the tradename/corporate name 'Ajanta Manufacturing Ltd'.

AML had in its DRHP admitted that the use of the tradename/corporate name was under challenge before this court but deliberately chose not to disclose that an interim injunction is effective against it, Ajanta India contended.

The petitioner also said that AML was well-aware of the fact that the 'Ajanta' tradename has been assigned to Ajanta India through a deed of assignment dated September 19, 2002.

AML directors Praveen Patel and Jaisukh Patel are the brothers of Ajanta India's MD A O Patel and were among the signatories to the deed of assignment, the petition stated.

Ajanta India has also moved an application for initiation of contempt proceeding against AML for not obeying the court's interim injunction order and proposing the public issue using the word 'Ajanta' in its name.

IPO Scam: Relief On The Cards

MUMBAI: A couple of years back, thousands of small investors who had flocked to IPOs found no shares coming their way. Reason: A clutch of operators had cornered the shares meant for them. Now, after a detailed regulatory probe and a committee to resolve the issue, the modalities to compensate these investors are nearly final.

Capital market regulator Securities and Exchange Board of India (SEBI) is set to issue caonsent orders to settle the enforcement action it had initiated against entities responsible for cornering shares meant for retail investors in 21 IPOs in 2005-06. By settling the proceedings against those who had allegedly violated securities laws, the regulator will be in a position to disgorge the gains made by them.

The shares of these operators, which have been frozen by the depositories, will be sold and the proceeds utilised to compensate retail investors who had applied for shares in IPOs such as IDFC, Jet Airways, NTPC and Suzlon Energy.

A SEBI probe blew the lid off the scam in 2006. The investigation showed that in 2005-06, a clutch of operators had filed thousands of fictitious applications in several IPOs, posing as retail investors. Thousands of bank and demat accounts were opened in the names of fictitious individuals to facilitate the plan. Once the scam came to light, depositories froze these shares on SEBI’s orders.

Once they were allotted shares, the operators transferred these shares to another set of players, who in turn, passed them to financiers who had provided the funds for investing in the IPOs. These shares were sold on the first day of listing, helping these operators reap a windfall — the difference between the IPO price and the listing price.

The value of the frozen shares is estimated at Rs 60-90 crore. A committee headed by Justice Wadhwa, which was appointed by SEBI to work out an equitable method for compensating retail investors, had come up with a figure of Rs 92 crore. The figure was based on the closing price of stocks of 21 IPOs on listing day.

The committee had said that retail applicants who did not get anything should be paid the difference between the offer price and the closing price on listing day. According to the committee, the differential could be taken as a proxy for the unjust gains made by the scamsters, who cornered shares meant for individual investors.

Not A Bad Time For Ipos, It's Price That's The Problem: Bhave

MUMBAI: Securities and Exchange Board of India (SEBI) chairman CB Bhave on Tuesday lambasted merchant bankers and promoters for being “greedy”, while speaking at an IPO seminar. According to Mr Bhave, the decline in the Sensex from 21,000 points to 15,000 points does not necessarily mean that it is a bad time for initial public offerings. “Is it really a bad time for IPOs, or is it the price?” the regulator questioned.

Mr Bhave said that during his interaction with merchant bankers, he was told that the promoters are greedy. But according to him, even merchant bankers are equally greedy. On the need for further reforms in the primary market, Mr Bhave said the regulator was looking to change the way in which investors subscribe to public issues. He said investors should pay only for the shares allotted to them and not have to wait for refunds. “There is no reason why an investor’s money should leave his bank account when he is not assured about allotment of shares. Technology will enable us to do that,” Mr Bhave said.

He said that he has asked the intermediaries to operationalise it on a voluntary basis. “What do you do with this money for 21 days?” he questioned. The regulator is mulling an instrument which would be blocked by the bank for the full application amount till the shares are allotted. The amount would continue to remain in the client’s account but would not be available for withdrawal or cheque payment.

It would, therefore, continue to earn interest in the intervening period. On receipt of advisory from the registrar about the allotment of shares, the bank would release the amount equal to the cost of total number of shares the client has been allotted. The move would apply to both physical and electronic applications.

Though it may take a while to implement the same, early availability of funds would help the investors from facing any liquidity shortage. The new measures are aimed at making the IPO process more efficient and transparent. Sebi chairman also said that regulator is making efforts for a more vibrant market for small and medium enterprises.

Sebi modifies Clause 49

Sebi has modified Clause 49 — relating to independent directors — by including some mandatory and non-mandatory provisions. According to a Sebi circular, at least one-half of the board of the company should consist of independent directors if the non-executive chairman is a promoter or is related to promoters or persons occupying management positions at the board level or at one level below the board.

Another mandatory requirement of Clause 49 would be that relationships between directors would have to be disclosed in specified documents/filings. While the minimum age for independent director has been fixed at 21 years, the regulator does not want the gap between removal of an independent director and the appointment of a new one to exceed 180 days.

However, this provision would not apply in case a company fulfils the minimum requirement of independent directors in its board (one-third or one-half as the case may be) even without filling the vacancy created by such resignation/removal.

Among the non-mandatory provisions, Sebi wants companies to ensure that the person who is being appointed as an independent director has the requisite qualifications and experience, which would be useful to the company and that he can contribute effectively in his capacity as an independent director.

The market regulator has asked all stock exchange to make the necessary amendments to the listing agreement to include the said modifications. Further, stock exchanges have been advised to “communicate to Sebi, status of implementation of the requirements of this circular in the next Monthly Development Report”.

“There is no reason why an investor’s money should leave his bank account when he is not assured about allotment of shares. Technology will enable us to do that,” Mr Bhave said.

He said that he has asked the intermediaries to operationalise it on a voluntary basis. “What do you do with this money for 21 days?” he questioned. The regulator is mulling an instrument which would be blocked by the bank for the full application amount till the shares are allotted. The amount would continue to remain in the client’s account but would not be available for withdrawal or cheque payment.

It would, therefore, continue to earn interest in the intervening period. On receipt of advisory from the registrar about the allotment of shares, the bank would release the amount equal to the cost of total number of shares the client has been allotted. The move would apply to both physical and electronic applications.

Though it may take a while to implement the same, early availability of funds would help the investors from facing any liquidity shortage. The new measures are aimed at making the IPO process more efficient and transparent. Sebi chairman also said that regulator is making efforts for a more vibrant market for small and medium enterprises.

Chiripal Plans To Raise Rs 120 Cr Through IPO

Chiripal Industries Ltd (CIL), a city-based textile company, has filed its Drafted Red Herring Prospectus (DRHP) with Securities Exchange Board of India (SEBI) for initial public offer (IPO) to raise close to Rs 120 crore. The amount is about half of the company's total planned capital expenditure of Rs 231 crore in the coming financial year.

CIL intends to issue 14.2 million shares of Rs 10 face value in the price band of Rs 80 to Rs 90 per share. With this IPO, the company will join the league of other listed companies of the Chiripal group - Nova Petrochemical and Nandan Exim Ltd.

"Company expects around Rs 110 to Rs 120 crore through its public issue although the final figure of the offering is not yet decided," said director, Chiripal Industries Ltd, Vishal Chiripal.

Company is in process of finalising its pre-IPO placement, subject to which issue size may be reduced. Out of the issue proceeds, the company will utilise around Rs 53 crore to fund its capital expenditure plan and will invest Rs 6 crore in its subsidiary Chiripal Lifestyle Ltd, to finance the first phase of its 20 retail outlets 'ConneXions'.

CIL will also utilise part of the raised fund to acquire 43% stake in Vraj Integrated Textile Park Ltd - a Rs 111 crore integrated textile park. The remaining funds will be utilised as working capital for the company. According to company officials, capital expenditure of Rs 231 crore will be funded through Rs167 crore term loans, Rs 53 crore issue proceeds and remaining from internal accruals.

The proposed capital expenditure plan includes setting up a new yarn dyeing facilities, fabric dyeing facilities and weaving facilities and expansion of its POY, FDY, textured yarn facilities, warp knitting facilities, embroidery facilities, processing facilities and readymade garments facilities.

CIL will also invest around Rs 30 crore in setting up 7.5 mw lignite-based power plant to cut down on its power cost.

At present, the company has a processing capacity of 85.80 million meters per annum. For the financial year ending March 2007, CIL registered a turnover of Rs381 crore with net profit of Rs 20 crore. For the six months ending September 2007, for the FY 2008, company's turnover was Rs 224 crore with profit of Rs 14 crore.

PAN Photocopy Not Necessary With IPO: SEBI

MUMBAI: The Securities and Exchange Board of India on Tuesday sought to clarify that it has not mandated the practice of public issue applicants attaching photocopies of PAN cards with the form.

The markets regulator has written to merchant bankers the present DIP guidelines only require the PAN number to be quoted in the application forms, irrespective of the size of the application.

SEBI has instructed merchant bankers to ensure that all collection agents do not refuse to accept applications in the absence of photocopy of PAN card, a circular said.

SEBI Seeks Clarification From Reliance Infratel, 24 Others

MUMBAI: The Securities and Exchange Board of India has sought clarifications from lead managers of proposed IPOs of 25 firms, including Reliance Infratel, JSW Energy and Oil India, that plan to raise money through share sale.

According to the latest processing status of draft offer documents filed with SEBI on or after April 1, 2007, clarifications are awaited from lead managers in relation to the draft offer document of 25 firms.

These 25 firms include Reliance Infratel, Cox and Kings (India), JSW Energy, Oil India Ltd, Mahindra Holidays & Resorts and National Hydroelectric Power Corporation.

In terms of the Disclosure and Investor Protection Guidelines, 2000, SEBI may issue observations on a draft offer document filed with it within 30 days from the date of receipt of such draft offer document.

But it may seek any additional information or clarification in relation to the draft offer document from the merchant bankers and issue such observations within 15 days from the date of receipt of satisfactory reply.

Anil Ambani group's tower business subsidiary Reliance Infratel had filed the draft prospectus with SEBI on February 4 for entering the capital market with a public issue of 8.91 crore equity shares.

JSW Energy, part of the Sajjan Jindal-led JSW group, also filed draft documents with the regulator for its maiden public issue of over 6.32 crore shares of Rs 10 each.

Sea TV Network Files IPO Papers With SEBI

MUMBAI: Sea TV Network Ltd has filed a draft red herring prospectus with the Securities and Exchange Board of India for an initial public offering of 1,00,00,000 equity shares of Rs 10 each for cash at a price to be decided through book-building.

The issue comprises promoters' contribution of 33,51,000 shares; 500,000 shares reserved for employees; and net offer to the public of 61,49,000 shares, of which 6,14,900 shares being 10 per cent of the net offer to the public to be compulsorily allotted to qualified institutional bidders. The net offer to the public would constitute 36.17 per cent of the fully diluted post issue paid up capital. The project has a participation of Rs 8.95 crore from Allahabad Bank.

The company is considering a pre-IPO placement with certain investors, subject to a minimum 25 per cent of the post-issue paid up capital being offered to the public.

The shares are proposed to be listed on Bombay Stock Exchange and National Stock Exchange.

Sea TV Network is an Agra, Uttar Pradesh based company engaged in providing services of a multi system operator to various local cable TV operators. The company focuses on the cable distribution business and intends to emerge as a MSO with an all India presence, while working in consonance with the broadcasters and the viewers.

Sea TV also has its own free-to-air local channels, programmes of which are produced by its own production team. These include SEA News (24-hour news channel of Agra city), SEA Jinvani (religious channel for the Jain community), SEA TV (local cultural programmes channel) and SEA Bhakti (24-hour religious channel). It already has a network of about 150 franchisees throughout Agra city.

The objects of the issue are to raise financial resources for setting up complete Digital Headend and network for implementation of Conditional Access System; setting up network for complete IPTV solution; setting up of own cable distribution (underground optical fibre) network capable of digital transmission throughout Agra and adjoining areas; setting up own 20 branch-offices in the city including in the adjoining areas with required infrastructure for receiving digital signals and re-transmitting the same without much value addition through co-axial cables to individual customers/subscribers. Sea TV proposes to adopt latest technology; i.e., IPTV for providing TV channels to its viewers.

The book running lead manager to the issue is Chartered Capital and Investment.