As per the new norms for IPP of shares, the companies would be allowed to issue fresh equity to institutional investors to dilute stake of promoters
Mumbai: In a move that could expedite government's disinvestment process, market regulator Securities and Exchange Board of India (SEBI) on Wednesday notified the Institutional Placement Programme (IPP) guidelines that will allow companies to reduce promoter shareholding through private placement, reports PTI.
As per the new norms for IPP of shares, even the companies would be allowed to issue fresh equity to institutional investors to dilute stake of promoters.
The notification, according to official sources, will help the government, which is hard pressed for funds, to expedite disinvestment process.
According to the SEBI (Issue of Capital and Disclosure Requirements) (Amendment) Regulations, 2012, a company will be allowed to dilute only 10% of its equity through sale of promoter stake or issuance of fresh equity.
"The provisions... Shall apply to issuance of fresh shares and or offer for sale of shares in a listed issuer for the purpose of achieving minimum public shareholding...," SEBI said in its notification.
The issue, according to the norms, would remain open for a maximum of 2 days and the aggregate demand schedule would have to be displayed by the stock exchanges without disclosing the price.
For coming out with an IPP, the guidelines said, the issuer would be required to obtain an in-principle approval from the stock exchanges and file the offer document with BSE, NSE and SEBI.
The government is facing the tough task of meeting the disinvestment target of Rs 40,000 crore in the current fiscal and is hopeful that the opening up of new avenues would help it fast track stake sale in PSUs.
"The IPP norms are broadly similar to QIP. But the 10% limit for stake sale can create roadblocks for companies where promoters hold above 85% stake. There auction will become compulsory after IPP," SMC Global Securities strategist and head of research Jagannadham Thunuguntla said.
While any company can come out with a Qualified Institutional Placement (QIP), IPP will be permitted only for reducing promoter shareholding.
As per government norms, at least 10% of the shareholding in all listed state-owned companies should be with the public by June 2013, though in the case of private sector companies it has to be 25%.
Nifty may oscillate between 5,130 and 5,290 with a downward bias
Concerns about the government’s excessive borrowing, as pointed out by the RBI, kept the market lower in the fist session. However, the buoyant European markets lifted the momentum in post-noon trade, resulting in the benchmarks closing in the green for the second straight day. Post noon, European indices helped the Nifty cross the upper range of 5,215, which we gave in our yesterday’s closing report, and close positive. We may see the index moving between 5,130 and 5,290 with a downward bias. The NSE saw a huge volume of 92.42 crore shares.
The market opened lower today as traders resorted to profit booking since the opening bell following recent gains. Also, a mixed trend across Asia on the back of lower-than-expected January manufacturing data from China and a fall in South Korean exports weighed on the sentiments. Back home, the Nifty opened one point lower at 5,198 and the Sensex lost 14 points as it resumed trade at 17,180.
The market was seen moving sideways till noon trade after which concerns raised by the Reserve Bank of India (RBI) over the government’s excessive borrowing pushed the benchmarks to the day’s lows. At the lows, the Nifty fell to 5,159 and the Sensex dropped to 17,062. The advance-decline ratio on the NSE was 1217:481.
However, a positive opening in the European markets resulted in smart recovery, which pushed the indices into positive terrain. The positive trend helped the market hit the day’s high at the fag end of the session. At the highs, the Nifty rose to 5,245 and the Sensex surged to 17,327.
The market closed marginally below those levels and in the positive for the second straight day. At the end of trade, the Nifty gained 36 points to 5,236 and the Sensex added 107 points to finish at 17,301.
The Asian markets, which opened mixed on economic growth concerns, closed mostly higher on support from the European bourses. While Chinese government data showed a rise in manufacturing output last month, the HSBC Manufacturing PMI data disappointed investors.
The Jakarta Composite gained 0.59%; the Nikkei 225 added 0.08%; the Seoul Composite rose 0.18% and the Taiwan Weighted advanced 0.43%. On the other hand, the Shanghai Composite tanked 1.07% and the Hang Seng settled 0.28% lower. KLSE Composite, the Malaysian benchmark was closed for trade today on account of a local holiday. At the time of writing, key European indices were higher by over 1% and the US stock futures were in the green.
Back home, foreign institutional investors were net buyers of shares totalling Rs624.10 crore on Tuesday whereas domestic institutional investors were net sellers of stocks aggregating Rs241.26 crore.
Among the broader indices, the BSE Mid-cap index rose 1.12% and the BSE Small-cap index moved up 1.71%.
The BSE Metal index (up 2.97%) was the top among all sectoral indices today. It was followed by BSE Capital goods (up 2.34%); BSE Auto (up 2.02%); BSE Power (up 1.62%) and BSE Realty (up 1%). The major loss was seen in BSE Consumer durable index which fell 1.31% while indices like BSE FMCG, BSE TECk, BSE IT, BSE PSU fell in the range of 0.03% to 0.15%.
Jindal Steel (up 6.43%); Tata Power (up 6.02%); Hindalco Industries (up 4.23%); Tata Steel (up 4.11%) and Hero MotoCorp (up 3.45%) were the top performers on the Sensex. The losers were led by Coal India (down 2.61%); ICICI Bank (down 1.53%); ONGC (down 1.32%); HDFC (down 1.28%); Bharti Airtel (down 1.04%).
ABG Shipyard has won an order worth Rs500 crore from Shipping Corporation of India (SCI) for construction of six new Bollard Pull AHTS vessels. The price of the vessels is $101.40 million (about Rs500 crore) and it will be delivered in 15 to 25 months from the date of signing the contract, with a gap of two months for each vessel. ABG Shipyard shares jumped 8.23% to close at Rs418.10 on the BSE.
Regency Ceramics has declared lock-out of its factory situated at Yanam in the Union Territory of Puducherry effective today, owing to unprecedented violence that occurred at the factory premises leading to police firing and imposition of Section 144 in the town. This caused extensive damage to the plant and machinery and the death of KC Chandrasekhar, president (operations), Regency Ceramics. According to the preliminary estimates by insurance companies, the loss could be over Rs150 crore. The company has an insurance cover of about Rs500 crore. Regency Ceramics' scrip closed at Rs 3.62 on the BSE, down 4.99%.
Fortis Healthcare, through its unit Fortis Healthcare Singapore Pvt Ltd bought 85% stake in RadLink-Asia Pvt Ltd for 62.9 million Singapore dollar (about Rs245 crore). RadLink has four main business segments -- diagnostic imaging, molecular imaging, cyclotron (radio isotopes manufacturing) and GP clinics. According to Fortis, this transaction will enable it get a strong foothold in the premium diagnostics and molecular imaging segment in one of South East Asia's most attractive markets. Fortis share closed 1.63% higher at Rs 106.30 on the BSE.
Health insurance claims data suggests average cashless amount of Rs45,000 compared to average reimbursement claim amount of Rs25,000. The insurance company trend of going for in-house claims processing is to help in better bargaining with hospitals for procedure rates
Insurance companies are of the view that overpricing by the hospitals has had a significant impact on the average claim amount when the insured goes in for cashless treatment. It is not just the rise by 26% in claim amount (cashless) as against 9% (reimbursement) over two years; the average claim size today for cashless is close to Rs45,000 compared to average reimbursement claim of Rs25,000.
According to Arvind Laddha, chief executive officer, Vantage Insurance Brokers and Risk Advisors, “While indifference on the part of patients, resulting in overtreatment and overcharging by hospitals have been regularly blamed for the higher bills associated with cashless transactions, it is also a fact that people tend to opt for cashless facility for expensive treatments. In case of hospitalization for inexpensive procedures, the insured may pay upfront and go in for reimbursement.”
According to one insurance brokering company, “Certain hospitals may overcharge, but it cannot be generalised. In some cases it may be better room offered in case of cashless. Most will treat uninsured or insured customer in the same way.”
The results were based on Vantage Insurance Brokers and Risk Advisors study of claims data of 4,90,000 employees of 285 employers across major industries.
The insurance company trend of going for in-house claims processing is to help in better bargaining with hospitals for procedure rates, but the lack of regulation in hospital pricing means that the insurer can influence the hospital rates only to a certain extent.
According to insurance company survey done by the same group, insurers believe that having in-built restrictions in the policy is the most effective measure to control claims (92%). This preference was followed by need to negotiate competitive rates with the hospitals (75%) and having in-house TPA (75%), review timelines for claim intimation and submission (67%). The other claim control measures from insurance companies are claims audit (58%) and restricting the network list of hospitals (58%).
Arvind Laddha adds, “In order to control claim cost, insurance companies realize that it is important to have in-house TPA to properly negotiate rates with hospitals. It is a difficult job with high-end hospitals as they get good business from people who are not insured. Lack of hospital regulator and less number of insured in India makes it difficult for insurance companies to restrict health insurance premium hikes,”
“In many government health insurance schemes, hospitals have agreed on lower rates. Government has to step-in to limit the hospital rates for mediclaim. On the other hand, many hospitals claim to not make big profits and hence cannot reduce rates by great extent.”
According to employer survey, corporate insurance premium increased by 40% in 2010, but only by 22% to 28% in 2011. The group expects health insurance premiums to rise, but the rate of increase would be lower at 15%-20% in the short-term and 10%-15% per cent thereafter.
Arvind Laddha adds, “While the premium (corporate) has certainly increased significantly over the last three years, we believe that it is likely to stabilize gradually going forward. In the long-term, premium increases will be more closely linked to healthcare inflation, morbidity patterns and the features incorporated in the benefits package.”
There is different view to stabilization of premium. According to one insurance broking company, “The premium charged by insurance company depends on many factors. New entrants may try to get business at lower premium with the expectation to get other businesses once they develop relationship. In some cases even established insurance company also grab business for financial need or to show growth on paper. Every insurer has different strategy and premium pricing has to be looked from various angles. Moreover, what happens in corporate business may not reflect in retail premiums as the businesses are different.”
On the retail front too, cashless mediclaim had seen overcharging by hospitals. In a bid to curb the increasing losses incurred by hospitals due to fraudulent and inflated claims, General Insurance Public Sector Association (GIPSA), a group of four government insurance companies had decided to restrict the cashless medical facility only to hospitals that agree to join the Preferred Provider Network (PPN). The rule, which was implemented on 1 July 2010, offers a negotiated rate for 43 treatments that are covered under the cashless policy. The four insurance companies are New India Assurance Company Ltd, United India Insurance Company Ltd, Oriental Insurance Company Ltd and National Insurance Company Ltd. While there has been some success in bringing high-end hospitals like Jaslok and Fortis in the PPN, many of leading hospitals in Mumbai are not on PPN.