SEBI puts curbs on Reliance Power offer

Market regulator Securities and Exchange Board of India (SEBI) has placed some restrictions on the impending initial public offering of Reliance Power and has asked the company and its merchant bankers to ensure all disclosures as per the relevant laws and the board's own comments on the prospectus that may follow.

SEBI was considering a complaint by Rajkot Saher Jilla Grahak Suraksha Mandal on the issue. Reliance Power is a 50:50 joint venture between Reliance Energy and AAA Projects, which is an Anil Ambani Group company. The proposed public issue could be the largest ever in India.

The regulator directed on Thursday that the entire 20 per cent of the promoter's share in the company should be locked-in for 5 years instead of 18.6 per cent as proposed in the Draft Red Herring Prospectus.

It has also noted that the company has withdrawn its application to split the shares of a face value of Rs 10 to those with a face value of Rs 2 and pointed out that guidelines mandate that in case the offer price is less than Rs 500 the shares may not be split.

The gist of the complaint was that by engineering a merger prior to the issue, the promoters have managed to misuse an exemption allowed by clause 4.6.4 of the guidelines for public issues. This would allow the promoters to not contribute any capital as a part of the issue.

The spokesperson for Reliance Power declined to comment on the issue.

SEBI also said: "The sequence of dates of the issue of shares to promoters, approval of the scheme of amalgamation, filing the same with the Registrar of Companies, allotment pursuant to the scheme and subsequently splitting the shares so allotted for the face value of Rs 2 each and filling DRHP with SEBI offering 130 crore of its equity shares with a face value of Rs 2 at a premium to the public could no doubt be interpreted and conceived as a device to bring the case under the exemption of clause 4.6.4."

SEBI noted "that the number of shares issued as a result of the amalgamation as a proportion of the total paid up capital of the issuer company is very high in the case of RPL (around 50 per cent)…" The regulator, however, said that some of the other issues raised in the complaint were not within its jurisdiction.

BSE to launch mini contracts in derivative market

MUMBAI: To attract retail investors into the ever-growing derivatives market, the BSE will launch 'Sensex mini derivatives contracts' from January 1, 2008. The small size of the contract would woo retail investors as there would be comparatively lower c apital outlay, trading costs, more precise hedging and flexible trading, a BSE release said.

The mini derivatives contracts would be in a market lot of five, it added. It is a step to encourage and enable small investors to mitigate risk and gain easy access to India's popular index, Sensex, through futures and options.

The security symbol for Sensex mini contracts would be MSX and would be available for one, two and three months along with weekly options. Market watchdog SEBI has approved introduction of seven new derivative products for the domestic market.

"The introduction of these products is a step intended to progressively encourage markets to move onshore,'' SEBI had said.

The Securities and Exchange Board of India had allowed trading in mini contracts on index (BSE 30-share Sensex and NSE 50-share Nifty) with a minimum contract size of Rs 1 lakh. - PTI

MFs may get to invest $7 bn abroad

KOLKATA: Mutual funds may get more liberty in 2008 in terms of their overseas investments. They are likely to be allowed to invest upto $7 billion collectively in overseas markets, which is a good 40% jump over the present ceiling of $5 billion. The present ceiling has been raised from $4 billion just about three months back.

Both financial regulators — Reserve Bank of India (RBI) and Securities & Exchange Board of India (SEBI) — have in principal agreed to the proposal to enhance the overseas investment ceiling further. According to top industry sources, the papers are lying with the government for final clearance.

Accordingly, the individual investment ceiling is also going to be raised from the current limit of $300 million. Not only will the proposed move allow fund houses to deepen their investment basket, a higher capital outflow would also ease the pressure on RBI in managing the dollar deluge.

Mutual funds can invest in American depository and global depository receipts, equity of overseas companies, foreign debt securities in the countries with fully convertible currencies and money market instruments rated not below investment grade.

When contacted by ET, SEBI officials declined to comment on the issue. Mutual fund circles close to the development, however, said SEBI had written sometime in November to the central bank seeking permission to raise total overseas investment by all mutual funds by $2 billion to $7 billion.

According to a senior RBI official, so far the mutual funds collectively have invested just about $1 billion in overseas markets, which is well under the current limit. “However, some aggressive fund houses have exhausted their individual investment limits of $300 million. These players have requested an enhancement of the ceiling,” he said.

Supporting this, Association of Mutual Funds in India (AMFI) chairman AP Kurian said: “So far, some five to seven fund houses have launched special schemes for investment in overseas securities. The total mop-up by these funds is yet to reach anywhere near the present $5 billion cap. This notwithstanding, we have been assured by both SEBI and RBI that they are open to consider increasing the overall overseas investment limit if needed.”

AIG Global Asset Management Company (India) CEO Saurabh Sonthalia said: “This industry has taken a step forward by investing in overseas securities. However, a lot of MF houses have launched hybrid funds which invest about 65% in India and the balance 35% in overseas securities primarily because of lower limits and tax considerations. But clearly there is an increasing demand for 100% offshore products. We have also sought SEBI approval for launching an overseas fund for investing in global gold mining companies.”

'Technical error' bug bites BSE

MUMBAI: It is now BSE’s turn to be hit by a “technical error”. Even as there is a move afoot to probe the delay in transfer of securities that took place on December 19 & 20, the market on Wednesday was once again abuzz with talk of payout problems. According to market participants a technical glitch saw payout being delayed at the BSE’s end. Several brokers said the exchange had communicated that payout would be delayed by a few hours. However till about 6.30-7.00 pm on Wednesday, the payout process was yet to commence. Several brokers also bemoaned the fact that this could mean that back-office operations at the brokers end would continue till about 9.30-10 pm. Even as questions about the efficacy of the system at the exchange level was raised, a moot point to note is that such delay in payouts is contradictory to what the capital markets regulator Sebi has intimated to the bourses. As per Sebi circular of September 2005, payout of securities by the exchange/clearing house/clearing corporation to the depositories is to be done by 1.30 pm on T+2, while payout of securities was to be completed by the depositories by 2.00 pm on T+2. Payin was to be done by 11 am. BSE spokesperson said it was a technical glitch and was largely on account of a delay at the clearing house end i.e. BOI Shareholding (Clearing House of BSE). They added that the regulator has been informed of the same. Delay in a few inter-depository transactions between NSDL and CDSL on December 19 & 20 had prompted the stock exchanges to auction a few shares thereby incurring losses to brokers and investors. Following this NSDL had written to SEBI suggesting that a committee be set up to probe this. Given the large volume of trades in the equity markets, there is concern that repeated disruptions on account of either software glitches or overloading of the systems could have adverse impact on the functioning of the capital market as a whole.

Indowind Energy raises Rs 118 cr via FCCBs

MUMBAI: Wind power company Indowind Energy on Wednesday said that it raised Rs 118 crore though Foreign Currency Convertible Bonds (FCCBs) for overseas business expansion.

The FCCBs contain a coupon payment of 2.5 per cent paid semi-annually and have a maturity period of five years and one day. They would be converted into equity shares at a premium of 33 per cent, Indowind said in a statement.

The underlying equity shares on conversion would be listed on BSE and NSE and the FCCBs on the Singapore Stock Exchange. The company has been developing wind farms since 1995. - PTI