Rushing Policy Changes

On 14th November, as the Sensex was soaring 900 points, the Securities and Exchange Board of India's (SEBI) board meeting at Chennai was being watched with great anticipation in Mumbai. There were two major items on the agenda -  to reduce the face value of all shares to one rupee, to relax the norms for infrastructure issues and permit companies to make initial public offerings (IPOs). Both...

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  • Face Value Quandary

    On 14th November, The Economic Times helpfully reported a key item on SEBI's board agenda. It said, SEBI planned to amend the Disclosure & Investor Protection (DIP) guidelines to force a uniform face value of one rupee for shares of all listed companies. What does this move imply? In June 1999, SEBI amended its guidelines to allow companies to choose the face value of their shares. Until then,...

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  • Corporate Objections

    Why had companies opposed the reduction in face value to one rupee? Their argument was that investors tend to create multiple folios thereby increasing the cost of servicing shareholders. Many companies came up with examples of how the ability to buy one share was already raising costs-add to this a face value of one rupee and there will be a servicing nightmare. In a paperless system, we are...

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