Investors eligible for share price discounts in public offers would now get this benefit at the time of their bids as against the current practice of such discounts being given at the time of share allotment.
In a circular issued to the stock exchanges, merchant bankers and other entities associated with public offers, market regulator Securities and Exchange Board of India (SEBI) has expressed its concern over the current practice as investors lose on the benefits like lower cash outgo and possible eligibility for more shares. SEBI said the new rules, which mandate discount being given at the time of bidding for initial or follow-on public offers (IPOs/FPOs), would be applicable for public offer documents filed on or after June 15, 2011.
“It has been observed that presently, the effect of differential pricing, if any, in a public issue, is being given to the eligible investors only at the stage of allotment of specified securities and not at the time of filing an application for such allotment,” SEBI said.
“In order to address the aforesaid issue, it has been decided to allow investors eligible for differential pricing in public issues to make payment at a price net of discount, if any, at the time of bidding itself,” SEBI said.