By IANS,
Mumbai : India’s capital markets regulator Wednesday proposed to double the investment limit for individual investors in initial public offerings (IPOs) to Rs.200,000 to attract more retail participants into such primary issues of companies.
Detailing out the reasons for increasing the limit for retail individual investors, the Securities and Exchange Board of India (SEBI) said the last revision was done five years back to Rs.100,000 from the earlier Rs.50,000.
During the period, inflation had risen from about 4 percent in 2005 to about 12 percent currently. In the same period, the BSE Sensex has risen from about 8,000 points to about 18,000 points.
“This means that the retail individual investors now buy a lesser number of securities with Rs.100,000 than they would buy with the same amount in 2005,” the regulator said in a discussion paper.
SEBI also opined that in large sized public issues the current limit of Rs.100,000 on the individual investor would mean the offer would need to attract a lot many entries to fill the 35 percent allocation.
Giving an illustration, the regulator said for an issue size of Rs.4,000 crore to Rs.6,000 crore, the limit of Rs.100,000 would mean that the issue has to receive a minimum of 150,000 to 200,000 applications from retail individual investors to fill the 35 percent allocation.
“This could be a daunting task considering that in case of well oversubscribed issues, the number of applications received from retail individual investors was in the range of Rs.35,000 to Rs.70,000,” said the statement.
“It is proposed to amend issue of capital and disclosure requirements regulations to enhance the limit prescribed for defining a Retail Individual Investor in a public issue from the existing Rs.100,000 to Rs.200,000,” said SEBI.