New options given by Sebi for share sale are market neutral By JAGANNADHAM THUNUGUNTLA, SMC GLOBAL On Thursday, Sebi has come out with various measures regarding IPO market, mutual funds and minimum public shareholding norms. The idea of this report is to concentrate on the impact of allowing two more instruments by Sebi for companies to meet with 25 per cent minimum public shareholding norms. Sebi has permitted bonus and rights issue to non-promoters as two more instruments to meet with 25 per cent minimum public shareholding norms. Earlier, there were instruments, such as FPOs (follow-on public offers), IPPs (institutional placement programmes) and auction routes were allowed. Besides these instruments, now Sebi has allowed two more instruments of bonus and rights Issues. The interesting part of these instruments is that both bonus and rights issues are market-neutral. All other previous instruments such as FPOs, IPPs were market neutral. To put in other words, to come out with FPOs, IPPs and auctions, the market conditions must be good. Whereas the new instrument of bonus has nothing to do with market conditions, because issuing bonus issue to non-promoters can be done by board of directors and shareholders resolutions, and no need of favourable market conditions. With the introduction of the new instruments (especially permitting bonus shares), Sebi has made market conditions irrelevant for compliance with these provisions. There are about 162 companies in India who have promoter shareholding more than the permitted limit. Hence, now all these companies have to comply with minimum public shareholding norms by June 2013 Further, Sebi by introducing the provision that they are ready to consider the proposals of the non-compliant companies on case-by-case basis has shown very practical and matured approach in ensuring the compliance by the deadline of June 2013. With these instruments, many of the Indian subsidiaries of MNCs who were planning delisting may give up their plans of delisting.