Market watchdog reduces timeline for rights issue

August 13th, 2008 - 9:50 pm ICT by IANS  

Mumbai, Aug 13 (IANS) Capital market regulator Securities and Exchange Board of India (SEBI) Wednesday reduced the timeline for rights issue to 43 days from 109 days. Contrary to the market expectations, SEBI also kept in place the curb on participatory notes or p-notes - an instrument to sell stocks to foreign clients.

“The market regulator has had a re-look at the entire process of rights issue and has decided to cut down on the timeline of rights issue to 43 days instead of 109 days under the earlier norms,” SEBI chairman C.B. Bhave told reporters after a marathon review at a meeting.

On the question of p-notes, Bhave said the issue was discussed at length, and it was decided to continue the ban.

P-notes are offshore derivative instruments on Indian stocks sold by brokerage houses to foreign clients at rates higher than what the investors would have paid had they gone through the foreign institutional investor (FII) route.

Yet, a large number of foreign investors prefer p-notes to protect their identity and give them easy entry-exit opportunity.

The market regulator also decided to review the pricing of Qualified Institutional Placement (QIP) - an instrument to help companies raise money from the domestic markets without having to file pre-issue filings with SEBI.

Bhave said under the new norms, QIP pricing will be done on two weeks’ average price.

“In current volatile market situation, it makes it difficult for a company to price its QIP on six months average price, so we have decided to cut down on the time,” he said.

SEBI also decided that mutual fund houses henceforth have to declare annual results within four months instead of six months, the norm till now.

The market regulator is studying the applications of the Bombay Stock Exchange, the National Stock Exchange and the Multi-Commodity Exchange to trade in currency futures.

It was also studying the issue of stock lending and borrowing, Bhave said.

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