SEBI plans to reserve 25% of IPO for MFs, insurers

According to SEBI, a higher participation of 25% of the issue size or half of that slotted for qualified institutional bidders would enable a fairer valuation

Sep 02, 2014 04:09 IST India Infoline News Service

The Securities and Exchange Board of India (SEBI) plans to make it mandatory for issuers to reserve 25% of an initial public offering (IPO) for domestic mutual funds and insurers, according to a media report.

However, if investors don't subscribe to their portion fully, the IPO could be considered a failure, the report added.

According to SEBI, a higher participation of 25% of the issue size or half of that slotted for qualified institutional bidders would enable a fairer valuation.

Besides, it will benefit both issuers and investors as these local institutional investors play the conservative card when it comes to pricing, aligning more with retail investors.

At present, the issuer allots 50% of the shares in an IPO to QIBs, which include overseas and domestic funds, 15% to non-institutional investors, including high net worth individuals and corporates, and 35% to retail investors.

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