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Sebi weighs simultaneous global, local floats

Rakesh P Sharma & Janaki Krishnan in Mumbai

The Securities and Exchange Board of India is considering a proposal allowing Indian corporates to make simultaneous offerings in India and abroad to raise capital.

At present, there is no provision for such an offering in either the Sebi regulations or the central government's norms for the issue of global depository receipts or American depositary receipts.

Sebi is in the process of constituting a committee to look into the various issues related to this. The committee will consist of representatives from the merchant banking fraternity, stock exchanges, Reserve Bank of India, depositories, the company law board, finance ministry and Sebi itself.

The committee will have the mandate to examine all the issues involved in facilitating such offerings and to work out the procedures for simultaneous offerings.

According to sources, in case companies are given this facility, "the company can make an offering of its securities simultaneously to the Indian public and to the overseas investors for the purpose of getting listed on Indian and overseas bourses."

This is expected to bring down the issue expenses and also make it easier for merchant bankers and the issuer companies to sell mega issues.

Knowledgeable sources said since simultaneous offerings were at two different places, involving two different sets of investors and under the regulatory jurisdiction of more than one regulator, there would be lots of concerns which would have to be addressed.

Some of these issues have been identified. Norms for public issues, that is disclosure requirements, promoters' contribution, lock-in period, pricing, book building norms, trading details, all stipulated by Sebi guidelines have to be brought in line with the requirements specified by overseas regulatory authorities.

There are differences between provisions of Sebi Investor Protection guidelines and the government's norms for GDR and Foreign Currency Convertible Borrowings. These differences have also to be looked while there may be issues related to the Foreign Exchange Management Act.

Other details include infrastructural changes such as introduction of electronic fund transfer and delivery versus payment.

Merchant bankers said that this would facilitate only very large issues in excess of Rs 1,500 crore (Rs 15 billion). The current regulations require a minimum issue size of Rs 250 crore (Rs 2.5 billion) while overseas offerings require a market capitalisation of $200 million (Rs 900 crore 0r Rs 9 billion).

It would mean a minimum 50 per cent dilution in equity, merchant bankers said. "The move could benefit a few institutional investors," said merchant bankers adding that otherwise retail and other types of investors would be unaffected by this move.

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