SEBI amends book-building process for private placement of debt

11 Oct 2022 , 08:50 AM

To address the issue of “fastest finger first,” the Securities and Exchange Board of India (SEBI) amended the book-building process for the private placement of debt on Monday.

SEBI stated that it received requests for a review of provisions related to the electronic bidding platform (EBP) from a variety of market participants in order to address the problems of “fastest finger first,” or allocation based on time priority in bidding for issuances with fixed parameters, certain bidders not receiving allocations despite working on the issuance pre-listing, a high ratio of greenshoe to base issue size, and restrictions on arrangers placing bids on behaviour.

SEBI issued a circular in which it stated: “It was observed that in order to address the worry of ‘fastest finger first,’ it is vital to adjust the book-building process to assure allocations based on the ‘best bid,’ rather than the bidder with the greatest technology for putting the fastest bid.

In order to help issuers gauge demand and get assurance from specific potential investors on subscriptions, SEBI has also permitted the introduction of the idea of an “anchor investor” as an option. As long as the total allocation to anchor investors doesn’t go beyond 30% of the base issue size, the issuer will decide how much money will be allocated to them. Additionally, the anchor section of the EBP would not be up for bid.

The regulator also changed the threshold limitations for applicability, the arrangers’ bid restrictions, and the default penalty.

Beginning on January 1, 2023, the new regulations would take effect.

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