The following news item was published in Business Standard of 18th June 2009:
Sebi allows concept of anchor investor
BS Reporter / Mumbai June 18, 2009, 18:27 IST
Market regulator the Securities and Exchange Board of India (Sebi) today allowed the concept of anchor investor (AI) in every initial public offering (IPO), who can invest up to 30 per cent of the institutional quota. An AI would have to be a qualified institutional buyer and invest a minimum of Rs 10 crore. It also has to bring in 25 per cent of the margin on application and another 75 per cent within two days of the closure. The lock-in period for an AI will be 30 days, said C B Bhave, chairman, Sebi today.The board has also approved amendments regarding disclosure norms for rights issues. Rights issues are those which entitle existing shareholders to buy newly issued shares at a discount. The board was also expected to consider amendments regarding the regulator’s structure that will give it powers of a civil court.Sebi also relaxed disclosure norms in rights offers by reducing the amount of documentation required. IPOs must be listed on at least one national exchange.Also, no listed company can issue shares with superior voting rights. There can also be no preferential issues with superior voting rights. This will avoid the possible misuse by the persons in control to the detriment of public shareholders.Sebi has said that there will be no entry load for the schemes, existing or new, of a mutual fund. The upfront commission to distributors shall be paid by the investor to the distributor directly. Distributors, on their part, will have to declare the commissions that they are getting from the investors.
Among other moves, the market regular has cut the fess by 50 per cent on both debt and equity deals. In case of equities, the fees will now be Rs 10 per crore of turnover (earlier Rs 20 per crore). In debt, the revised rate would be Rs 2.5 per crore of turnover (earlier Rs 5).
My comments on above news item were published in BS as under :
jsbroca June 19,2009, 6:30 IST
Dear Sir, Earlier we have heard of an “Angel Investor” ie one affluent individual who provides capital for a business start up in exchange for convertible debt or ownership equity.Now we hear of this new term “Anchor Investor” who will be a buyer who can subscribe upto 30% of institutional investors quota in an IPO.I believe that once an anchor investor invests a large chunk of money into the company,it will send strong signals of the capability,capacity and character of the company to the investing community.Further,abolishing entry load in MFs is also a timely step in the right direction.My only comment regarding the concept of Anchor Investor is :Can an “insider” manage to become an anchor investor ? If yes what could be the consequences ? Lets test the waters for a while and see how the concept works in reality and then form an opinion about continuing with it or otherwise. Kudos to SEBI for this step !!
– J S BROCA