Wednesday, July 11, 2007

Easier IPO norms for PSU cost in India

by Vipin Agnihotri

The Securities and Exchange Board of India (Sebi) has relaxed the rules for government-owned infrastructure companies for raising funds through initial share offerings by terminating the mandatory one-year lock-in requirement of pre-issue share placements.

For the government companies involved in infrastructure projects, Sebi has lifted the minimum pricing norms and the minimum stake that these could offer to the public while going for IPO. The amendments are aimed at helping government companies government firms such as PSUs, statutory authorities and special purpose vehicles (SPVs) set up by them to raise funds from the capital market for their infrastructure development activities.

At present, the Sebi rules require one-year lock-in period for those who purchase shares prior to an IPO by these companies. Moreover, the moderation would enable government companies to attract more investors at higher valuations by selling shares as pre-IPO placements as the
investors have a choice to depart from the company even on a brief time-span.

Sebi has also eased disclosure norms, by amending clause 41 of the Equity Listing Agreement, for listed companies by the listing agreement. The Sebi circular includes almost every type of infrastructure companies including those in transportation and logistics services.

According to the amended norms, companies furnishing unaudited financial results will now be obligatory to file a copy of the limited review report to the stock exchanges within two months from end of the quarter.

In another related development, the Reserve Bank of India (RBI) has reportedly opposed Finance Minister P Chidambaram’s budget proposal on utilization of a part of the foreign exchange reserves of over $200 billion to provide “credit wrap,” or credit guarantee insurance, for financing infrastructure projects.

The RBI has thwarted out the idea of ‘cred wrap’ on the ground that the proposal did not stand with the conformity with the Reserve Bank of India Act, 1934. The proposal was mooted with a view to provide private Indian firms credit guarantee insurance through an overseas subsidiary of Indian Infrastructure Finance Corporation Ltd (IIFCL), a government-owned financial institution. This would allow them to raise long-term resources more easily in international markets for infrastructure projects.

 


 

 

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