Cabinet nod may not be required for PSU share buyback: Finance ministry

“We may not need fresh Cabinet approval for selling stake in PSUs through buyback and private placement as the Company Law, under which PSUs are governed, approves buyback” a senior finance ministry official said

New Delhi: Cabinet approval may not be required for the finance ministry to go ahead with its plan of PSU disinvestment through buyback and private placement mode, reports PTI.

As public sector undertakings (PSUs) are guided by the Companies Act, sources said they can buy back their shares after approval of the board.

“We may not need fresh Cabinet approval for selling stake in PSUs through buyback and private placement as the Company Law, under which PSUs are governed, approves buyback” a senior finance ministry official told PTI.

The finance ministry had earlier floated a Cabinet note seeking responses of administrative ministries by allowing buyback and private placement mode for disinvestment.

Since the beginning of the disinvestment programme, the government has divested stake in PSUs either through initial public offers (IPOs) or follow on public offers (FPOs).

“For the companies for which the government already has Cabinet approval for disinvestment, we do not need fresh nod.

We will go ahead with ONGC stake sale once there is clarity on Securities and Exchange Board of India (SEBI) guidelines on the revised buyback and institutional placement norms,” the official said.

Market regulator SEBI has earlier this month relaxed norms for buyback of shares and dilution of equity by companies.

The new norms would help the companies to complete the process of selling shares within days against the normal process which can take months, a move that will facilitate offloading of government shares in central PSUs.

Besides reducing the timeline for completion of buyback of shares by companies to 34-44 days, it has also introduced a new mechanism called Institutional Placement Programme (IPP)—that would allow promoters to sell up to 10% of their capital through an auction.

The DoD is running against time to meet its ambitious disinvestment target of Rs40,000 crore for the current fiscal. Till date it has been able to raise only Rs1,145 crore from PFC.

In order to fast track the disinvestment programme, the DoD had sought opinion of concerned ministries for buyback of shares and prepared a list of cash-rich PSUs in this regard.

Several ministries like oil, power, steel, coal and mines are believed to have opposed the proposal saying it could impact the business expansion plans of the PSUs.

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SEBI to come out with IPP guidelines in next 3-4 days

Opening of the IPP route would facilitate the disinvestment programme of the government in current market conditions. The government is running against time to meet its ambitious disinvestment target of Rs40,000 crore for the current fiscal

New Delhi: Capital market regulator Securities and Exchange Board of India (SEBI) has said it would issue guidelines next week for private placement of shares through auction route to institutional investors by promoters, reports PTI.

“IPP (Institutional Placement Programme) guidelines would come in next 3-4 days. Work has been done with regard to changes in regulation. Those changes would be done in next 3-4 days,” SEBI chairman UK Sinha said.

IPP would allow promoters to sell up to 10% of their capital through auction to institutional investors.

Opening of this additional route would facilitate the disinvestment programme of the government in current market conditions.

The government is running against time to meet its ambitious disinvestment target of Rs40,000 crore for the current fiscal.

“This method can be used only for the purpose of complying with minimum public shareholding requirements under Securities Contract Regulation (Rules) or SCRR, either by way of fresh issue of capital or dilution by the promoters through an offer for sale,” SEBI had said earlier this month after its board approved a new IPP route.

Using this method, public shareholding can be increased by 10% or lesser percentage as is required to comply with the minimum public shareholding requirement, it had said.

As per government norms, at least 10% of the shareholding in all listed state-owned companies should be with the public, while in the case of private sector companies, the minimum public shareholding should be 25%.

SEBI had said under the IPP mode, companies would be required to simultaneously file a red herring prospectus/prospectus with SEBI, the Registrar of Companies and stock exchanges.

Under the new mechanism, the offer would be restricted to Qualified Institutional Buyers (QIBs), it said. A minimum of 25% of the offer would be reserved for mutual funds and insurance companies.

The company or promoter would announce an indicative floor price or price band at least one day prior to the opening of the offer, it had said.

Issuers shall endeavour to maximise the number of allottees in order to ensure wider distribution of shares, it had said, adding that there shall be at least 10 allottees in every IPP issuance. Furthermore, no single investor shall receive allotment for more than 25% of the offer size.

The regulator also allowed the stock exchange to offer a separate window for the purpose of such sales. The duration of this window would co-exist with the normal trading hours, it had said.

Allotment would be done either on price priority or a clearing price basis proportionately and would be overseen by the exchanges, it added.

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Norms for MFs, insurers’ participation in preference issues eased

“It has been decided to exempt insurance companies and MFs from the provisions of SEBI (ICDR) Regulations relating to sale and lock-in of their pre-preferential shareholding in the issuer company,” SEBI chairman UK Sinha said after a board meeting on Sunday

New Delhi: Market regulator Securities and Exchange Board of India (SEBI) on Sunday relaxed investment norms by waiving the six-month lock-in period for insurance companies and mutual funds (MFs) participating in preferential allotment of shares, reports PTI.

“It has been decided to exempt insurance companies and MFs which are broad-based investment vehicles representing the interests of the public at large from the provisions of SEBI (ICDR) Regulations relating to sale and lock-in of their pre-preferential shareholding in the issuer company,” SEBI chairman UK Sinha said after a board meeting here today.

“As a matter of liberalisation, we have taken this measure, if there is broad-based investor base, for example the mutual funds and insurance companies which do not represent the interest of one particular investor, they have group of investors backing them and they take their decisions on professional consideration... why should they be debarred from this facility.

“Even they have bought or sold in the last six months they will be permitted (to participate in another preferential allotment). So, they have been given this special exemption,” Mr Sinha added.

As per the SEBI regulations (Issue of Capital and Disclosure Requirements (ICDR), an insurance company or a MF cannot participate in preferential allotment transactions before the six-month cooling off period.

Also, allottees are required to lock in their entire holdings for six months under the present norms.

The board has decided to enhance the minimum investment amount of clients under the portfolio management schemes (PMS) to Rs25 lakh from Rs5 lakh at present. This would apply to new customers.

“PMS regulations are light touch regulation and SEBI was worried that retail investors are being drawn into it whereas their interest are not as tightly protected or guarded as it is in mutual fund regulation,” Mr Sinha said.

The changes would be brought about by amending the SEBI (Portfolio Managers) Regulations, 1993.

Further, SEBI has said that Asset Management Companies (AMCs) would be responsible for accuracy and truthfulness of the advertisements.

“AMCs (which float MFs) shall be responsible for the accuracy, truthfulness, fairness of the advertisement”, said a statement issued after the SEBI board meeting here.

The market regulator further said that SEBI (Mutual Fund) Regulations, 1996 would be amended and the advertisement code would be modified to broaden the definition of advertisement to include all forms of communication that may influence investment decisions of an investor.

These steps, SEBI added, were aimed at “providing flexibility to AMCs in issuing true and fair advertisements with meaningful disclosure to investors... Advertisement Code shall be amended and made principle based as far as possible”.

AMCs, SEBI said, will be required to accord a “fair treatment to all investors, in all schemes.” 

The capital market regulator has brought down limit for calculation of mark-to-market fair valuation to 60 days from existing 91 days.

“In case debt and money market securities are not traded on a particular valuation day then valuation through amortization basis shall be restricted to securities having residual maturity of up to 60 days (currently 91 days), provided such valuation shall be reflective of the realizable value or fair value of the securities,” Mr Sinha said.

“So if there are any securities where the balance period is more than 60 days so in those cases you will have to have mark-to-market valuation. Earlier this stipulation was 91 days,” he said.

“This will make NAV more realistic which means risk people might be taking for inter-scheme to that extent it will be curbed,” he added.

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