Limit for retail investment in IPOs to be raised
Retail investors will now get to subscribe more in initial public offers (IPOs). The Securities and Exchange Board of India (Sebi) has proposed to raise the investment limit for retail investors from the current Rs1 lakh to Rs2 lakh.
The move is seen as an intermediate step before increasing the limit to Rs5 lakh and is expected to help companies obtain more retail subscriptions in IPOs. Currently, individual investors are classified as retail only if their investment is Rs1 lakh or less. Some 35% of the amount to be raised by IPOs is reserved for retail investors, but due to the low investment limit, very often they are undersubscribed. According to the regulator, the proposed increase in the investment limit is intended to keep pace with inflation and also the changing nature of market valuations. While inflation is close to double-digits, the market has risen over 125% since 2005. Rs1 lakh does not fetch the retail investor too many shares, given the bloat in share valuations.
According to a discussion paper released by Sebi, large-sized public issues easily require between 1.5-2 lakh applications to meet their retail quota. 10mg cialis This is much higher than the 35-70,000 applications received from retail investors in recent issues. Sebi has invited comments on the discussion paper till September 3. Sebi has also noted that in recent public offerings, approximately 75% of applications in the retail category cialis trial pack have come in the size of Rs80,000-Rs1 lakh. The number of applications in the non-institutional category, which is used by high net worth individuals, is usually above Rs5 lakh, but retail investors avoid investing in this segment since the reservation of shares is only 15% against 35% for retail.
Source: DNA India
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