Sebi may increase limit upto 2 lakh for retail investors
Securities and Exchange Board of India (Sebi) has intended to increase the investment limit for retail investors in public issues. This move by Sebi will be welcomed by the investment banking and broking community.
The market regulator said in a discussion paper released on Wednesday that the limit could be increased from the current cap of Rs1 lakh to Rs. 2 lakh.
Market investors have been asked to submit comments on the proposal before September 3.
There was a debate in the recent past regarding the Rs 1-lakh. The investors’ are of the opinion that the low investment limit requires lakhs of applications from small investors for the retail portion to be fully subscribed, making it a logistical nightmare.
Case in point is, in a Rs 5,000-crore issue, a 35 per cent reservation for retail investors would require Rs 1,750 crore to be raised through small investors. Assuming every retail investor submits a bid for Rs1 lakh, it would require 175,000 applications for the segment to be fully subscribed. Not surprisingly, quite a few recent issues that were subscribed more than one time saw the retail portion remaining undersubscribed.
The discussion paper by Sebi says, “This could be a daunting task, considering that in the case of well oversubscribed issues, the number of applications received from retail individual investors was in the range of 35,000 to 70,000.”The issue of attracting retail investors in public issues has been high on the regulator’s agenda. Only recently, it allowed issuers to close the bidding for qualified institutional buyers one day prior to retail investors. The premise was that retail investors would get enough time to make investment decisions based on the appetite of institutions.
“It is more than five years since the limit of Rs 1,00,000 for defining a retail individual investor was stipulated. It is felt that the aforesaid limit… needs to be enhanced,” notes Sebi’s discussion paper.
