Stocks
Share auction route to help retail investors, promoters: SEBI

 

SEBI’s latest move will pave the way for the top 100 companies, including blue-chip state-run enterprises like ONGC, IOC, SAIL, BHEL and NTPC, from which the Centre is planning to divest more of its stakes. Leading Sensex companies like Wipro will be able to offload its equity expeditiously and meet the mandatory 25% public float

Mumbai: Market regulator Securities and Exchange Board of India (SEBI) on Wednesday said the rationale behind allowing the auction route for companies to sell stake in the secondary market is aimed at the paramount objective of protecting interests of retail investors, reports PTI.

“SEBI’s objective is to protect interests of retail investors. We also have to put in place a system wherein companies can meet the mandatory 25% public float guidelines by the 2013 deadline. At the same time, we have to ensure that interests of retail investors are not jeopardized in this process,” SEBI chairman UK Sinha said explaining the rationale behind allowing the auction route.

He was talking to reporters at the BSE after launching the country’s first unified KYC Agency by the Central Depositories Services, under the new know-your customer norms.

“The main rationale behind yesterday’s decision is to allow companies to meet the 2013 deadline to have 25% of their shareholding in the public domain. SEBI is of the view that we should help companies to meets our own requirements.

“And we have realised that they won’t be able to meet this with the current method of follow-on public offers (FPOs) considering poor market conditions and the low prices of their stocks,” he said.

After a board meeting, SEBI had Tuesday announced steps to expedite stake sale by promoters by opening a new window called the institutional placement programme (IPP) route, besides relaxing the rules governing share buyback process.

“Another reason, which is of paramount importance to SEBI, is protecting interests of retail investors. If we stick to the FPO route, past experiences have shown that retail investors’ interests were not protected. And if we continue with the existing method, then their interests will be jeopardized and they will be ultimate losers,” Mr Sinha added.

“Past experiences have shown that the interest of retail investors was not protected when companies adopted the follow-on public option (FPO) route to offload their stake.

And we are of the opinion that if we continue with the existing FPO method, then their interests will be jeopardized,” Mr Sinha said.

Normally, retail investors as also existing shareholders lose out in the FPO game as promoter companies bring down the share price to make the new offering more attractive to new investors. This has happened with all the FPOs from the PSUs last year.

“Another reason behind yesterday’s decision is to allow companies to meet our own 2013 deadline to have 25% of their shareholding in the public domain.

“SEBI is also of the view that we should help companies to meet our own requirements. And we have realized that they won't be able to meet this deadline with the current method of FPOs considering the existing poor market condition and with very low share prices,” he added.

The new IPP window will allow promoters to sell up to 10% of their capital through the auction route instead of the FPO model.

SEBI’s latest move will pave the way for the top 100 companies, including blue-chip state-run enterprises like ONGC, IOC, SAIL, BHEL and NTPC, from which the Centre is planning to divest more of its stakes. Leading Sensex companies like Wipro will be able to offload its equity expeditiously and meet the mandatory 25% public float.

The decision comes in the backdrop of the government running against time to meet its divestment target of Rs40,000 crore this fiscal. So far, it has been able to mop up only under Rs3,000 crore this fiscal.

In the 2011 calendar year, both the Sensex and Nifty lost 25% of their value from December 2010 closing, making them the worst performing indices in the leading emerging markets, as FIIs turned out to be net sellers in 2011 against a whopping $29 billion investment in 2010.

 

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SEBI fines two persons Rs60 lakh for insider trading

SEBI has imposed a penalty totalling Rs60 lakh on Ranbaxy Laboratories’ former independent director VK Kaul and his wife for insider trading in the purchase and sale of scrips of Orchid Chemicals & Pharmaceuticals

Mumbai: Market regulator Securities and Exchange Board of India (SEBI) has imposed a penalty totalling Rs60 lakh on Ranbaxy Laboratories’ former independent director VK Kaul and his wife for insider trading in the purchase and sale of scrips of Orchid Chemicals & Pharmaceuticals, reports PTI.

While Mr Kaul has been fined Rs50 lakh, his wife Ms Bala Kaul has been handed a fine of Rs10 lakh, SEBI said in two separate orders.

The case relates to the sale of 6.5 lakh shares in Orchid Chemicals & Pharmaceuticals (OPCL) by Bear Sterns in March 2008.

The scrip saw a huge fall in the last half of March 2008 but then recovered significantly. Several alerts were generated at the NSE and BSE and the scrip was taken up for joint investigation by the exchanges on the basis of which a report was submitted by them in April that year.

Ms Bala Kaul had bought shares of OCPL from stockbroker Religare Securities on 27-28 March 2008, just prior to the start of share buying by Solrex, a Ranbaxy holding company, on 31 March 2008.

She bought a total of 35,000 shares at an average price of Rs131.71 and sold them on 10 April 2008, at an average price of Rs219.94, the SEBI said in its order.

VK Kaul was at that time serving as an independent director in Ranbaxy Laboratories.

“... It was alleged that noticee (VK Kaul), being a connected person of Ranbaxy Laboratories as per Regulation 2 (c) (i) of SEBI (Prohibition of Insider Trading) Regulations, 1992, had traded on behalf of his wife in the scrip of OCPL based on unpublished price sensitive information...” SEBI said, adding that it led to a violation of its regulations.

SEBI’s Integrated Surveillance Department had also asked the NSE to examine the trading activity in the scrip.

The findings pointed toward insider trading by Ms Bala Kaul and it was observed that her husband had provided her with funds to trade in the scrip of OCPL.

SEBI had in April 2008, sent a show-cause notice to the Kauls to which the noticees gave their replies.

Refuting the noticees contentions, the regulator said that based on circumstantial evidence, “It can be reasonably concluded that the noticee had received/access to Unpublished Price Sensitive Information (UPSI).”

As VK Kaul was at that time an independent director of Ranbaxy Laboratories, the holding company of Solrex, he becomes eligible to be held in violation of insider trading, it said.

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Mutual funds lose Rs16,000 crore in 2011; HDFC MF remains on top

As per the latest quarterly data released by AMFI, the cumulative average Assets Under Management of all fund houses stood at about Rs6,87,640 crore in the last quarter of 2011, a decline of Rs16,040 crore from a total of Rs7,03,680 crore in the first quarter of 2011

New Delhi: The mutual fund industry took a hit of more than Rs16,000 crore on its asset size during 2011, even as the newly-crowned market leader HDFC MF grew in size and consolidated its top position, reports PTI.

As per the latest quarterly data released by Association of Mutual Funds in India (AMFI), the cumulative average Assets Under Management (AUM) of all fund houses stood at about Rs6,87,640 crore in the last quarter of 2011.

This marked a decline of Rs16,040 crore from a total of Rs7,03,680 crore in the first quarter or January-March period of 2011.

Experts attributed the fall to the sharp losses in the stock markets, as also to the withdrawals by investors. The funds typically collect money from investors to invest in various asset classes including stocks and debt securities.

The loss was even larger for the cumulative asset base of the top five fund houses (HDFC, Reliance, ICICI Pru, Birla Sunlife and UTI Mutual Funds), as their total average AUM declined by Rs31,741 crore in the same period to end the year at Rs3,60,733.14 crore.

At the end of 2011, HDFC Mutual Fund retained its leadership position with total average AUM of Rs88,737.07 crore. It marked an increase of Rs2,455 crore from the levels in the first quarter of 2011.

HDFC MF was the only one among top five fund houses to register an increase in this period, as the remaining four saw their AUMs decline.

Reliance MF's average AUM dipped by Rs17,417 crore to Rs84,300.35 crore, while that of ICICI Prudential MF dipped by Rs4,080 crore to Rs 69,472.08 crore.

Birla Sunlife MF’s average AUM dipped by Rs3,327 crore to Rs 60,406.30 crore, while the decline was larger at Rs9,371 core for UTI MF, whose average AUM stood at Rs57,817.34 crore in the October-December quarter of 2011.

At the end of 2011, there were a total of 44 fund houses in the country, as against 42 in the first quarter.

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