Sebi Board Meeting: New Rules To Make Investing Easier And Safer

In its 211th board meeting in Mumbai, the Securities and Exchange Board of India (Sebi), on September 12,  announced important changes to stock market rules, according to its press statement. These updates make investing easier and encourage more companies to list on stock exchanges.

The focus is on Initial Public Offerings (IPOs), related party transactions, anchor investors, and foreign investments.

IPO Rules Made Simpler

Big companies often avoid listing on the stock market because they must sell a large portion of their shares to the public. This puts pressure on their stock price. Now, Sebi has made it easier. 

Companies valued between Rs 1 lakh crore and Rs 5 lakh crore need to offer only Rs 6,250 crore worth of shares, or 2.75 per cent of their total shares. For companies above Rs 5 lakh crore, the requirement is Rs 15,000 crore, with just one per cent of shares being offered.

Also, the time to meet the minimum public shareholding rules has been extended. If a company has less than 15 per cent public shareholding, it now has five years to reach that level, and ten years to hit 25 per cent. These steps are designed to encourage big firms to list while keeping markets stable.

Stronger Role For Anchor Investors

Anchor investors are large institutions that buy shares in an IPO before it opens to the public. Sebi has increased the anchor investor share from 33 per cent to 40 per cent. At least one-third of the anchor investment must now come from mutual funds, while the rest comes from insurers and pension funds.

For smaller IPOs (up to Rs 250 crore), between five and fifteen anchor investors are needed, each putting in at least Rs 5 crore. Foreign investors managing several funds now have more freedom, as the previous Rs 10 crore limit doesn’t apply.

Clearer Rules Regarding Party Transactions

Related party transactions occur when companies do business with their promoters or other linked entities.

These were considered risky because promoters might have been making deals at the expense of small shareholders.  Now, Sebi has said that companies need to follow strict turnover-based limits. Small transactions (under one per cent of turnover or Rs 10 crore) need simpler disclosures, while big deals need stricter audit and reporting.