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Mint
4 days ago
- Business
- Mint
A loophole lets retail investors bid for some small-business IPOs
Regulations barring retail investors from the high-risk initial public offerings of tiny businesses have failed to prevent the category from participating in at least a few such issues. The reason: a loophole in the rules. National Stock Exchange and BSE Ltd, in consultation with the Securities and Exchange Board of India (Sebi), amended rules to raise the minimum bid for the IPOs of small and medium enterprises (SMEs) to more than ₹2 lakh for offers filed with the exchange after 8 March. The change in Regulation 267 of the Issue of Capital and Disclosure Requirements (ICDR) effectively prevents retail or small individual investors from such issues, since they cannot invest more than ₹2 lakh. However, IPOs approved before the 8 March cut-off can still offer small investors a chance to bid below ₹2 lakh. That's because exchanges give companies a window of one year from the date of approval to launch their maiden offer. Also read: Sebi's co-investment plan wins fund favour; lawyers warn of tax, legal cracks Unless the bourses issue circulars offering clarity, retail investors may be unable to participate in fresh SME IPOs but may be able to bid in older offers, according to analysts. 'A handful of SME IPOs that filed their prospectus before March 2025 are yet to open for subscription. These IPOs still allow applications for around ₹1 lakh to ₹1.2 lakh amounts that are significantly more accessible for individual investors," said Rohit Jain, managing partner at law firm Singhania & Co. 'However, it's a narrow window, as most of these IPOs are expected to hit the market in the next few weeks." Small firms whose IPO prospectuses were filed before the cut-off include 3B Films Ltd, LGT Business Connextions Ltd, Mahendra Relators and Infrastructure Ltd, and Everstims Technologies Ltd. 3B Films' offer, which is open for subscription from 30 May to 3 June, has received 177 applications from the retail category and is planning to raise ₹33.75 crore from the offer. Its minimum bid quantity is 3,000 shares, which means a minimum investment of ₹1,50,000 as the offer price is ₹50. Nikita Papers and Blue Water Logistics' offers, which closed on 29 May, also received bids from retail investors. Also read: IndiGo's promoter Rakesh Gangwal to sell $803 mn stake Around 348 companies have announced their intention to raise money on the SME platform, according to Prime Database. However, exchanges reveal the names of the companies launching offers a couple of days before an issue opens. Sebi rules Sebi tweaked the rules as retail participation surged in SME IPOs even as the regulator found cases involving misuse of proceeds and misconduct. Small businesses raised ₹9,120 crore through IPOs in FY25 against ₹5,971 crore in FY24, ₹2,235 crore in FY23, and ₹965 crore in FY22, according to data shared by Prime Database. That mirrors the record ₹1.62 trillion mop-up from the main board IPOs in FY25. Sebi regulates the mainboard IPOs, while exchanges oversee the SME segment in consultation with the regulator. 'We are still seeing DRHPs getting filed, which have a quota for retail applications. However, it will depend on the exchange to either accept or reject the retail quota," said a senior executive at an investment management firm, speaking on the condition of anonymity. The exchanges are said to be working to address this gap, according to a person aware of the development, who spoke on the condition of anonymity. Queries emailed to the NSE and BSE on this loophole remained unanswered. Retail investors were excluded from the IPO of NR Vandana Tex Industries Ltd., with a minimum bid amount of ₹2.44 lakh. The cotton textile company filed its red-herring prospectus on 21 May. Unlike the other SME IPO bids, the company's offer, which closed for subscription on Friday, received bids from 33,597 individual investors who are not retail investors. '…the rules (barring retail investors applying in SME IPOs) only apply to companies filing their prospectus after March 2025," Mohit Mehra, vice president of primary markets and payments at Zerodha, said in a post on X (formerly Twitter). 'Since prospectuses remain valid for a year, companies going public now may still allow retail participation if they filed before March 2025." Also read: Asset manager Abakkus plans mutual fund foray to ride retail demand Sebi, ahead of amending the rules, had cited increased retail participation in SME IPOs for its decision. 'Considering that SME IPOs tend to have a higher element of risks and investors getting stuck if sentiments change post listing, in order to protect the interest of smaller retail investors, the limit was increased," the regulator had said in a consultation released on 19 November. 'In recent times, instances have been observed of diversion of issue proceeds to related parties and shell companies and inflation of revenue was shown by circular transactions," Sebi had said.
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Business Standard
21-05-2025
- Business
- Business Standard
FY25 marks among the least ever spends on taking companies private
Acquisition amount at less than Rs 100 crore Sachin P Mampatta Mumbai Listen to This Article Acquirers have seldom spent as little on delisting attempts as they have during the previous financial year. The total amount spent on delistings in financial year 2024-25 (FY25) is at a five-year low of Rs 70.98 crore, according to numbers from tracker Prime Database. It has been lower only twice before. It had touched Rs 58.39 crore in FY20 and Rs 46.77 crore in FY17. This comes after the acquired amount for delisting purposes touched a peak of ₹4,676 crore in FY21 during the pandemic volatility. A number of promoters had announced delisting amid a market rout following Covid-19 amid
Mint
19-05-2025
- Business
- Mint
Block deals stage a comeback, defying IPO lull, volatility
Block deals are making a comeback, offering much-needed relief to India's equity capital markets amid an ongoing lull in initial public offerings (IPOs) and heightened volatility, according to experts. In just the first 15 days of May, investors executed 12 block deals worth ₹3,541.97 crore compared with only five deals aggregating ₹506.37 crore in April, according to data from Prime Database. Last week alone, nearly six large transactions took place; Antfin sold 4% stake in Paytm, General Atlantic divested 6.9% in KFin Technologies, and Singapore Telecommunications Ltd offloaded 1% stake to Bharti Airtel. Sajjan Jindal Family Trust also plans to sell shares worth up to ₹1,200 crore in JSW Infrastructure through a block deal in the coming days, according to media reports. 'This has been on account of a rebound in market sentiment and geopolitical de-escalation and supported by close to $3 billion in FII net inflows this quarter, along with steady DII participation, signaling renewed investor confidence," said Gaurav Sood, managing director and head, equity capital markets at Avendus Capital, an investment banking firm. Also read | Sebi seeks to streamline QIP disclosures but experts flag legal hurdles Global tailwinds are also contributing to this rebound. The US has dialled back aggressive tariff policies and is working to resolve trade tensions with its key partners. 'With the US now working to finalize trade treaties with its largest trade partners has eased this tension on the markets, which has been one of the factors that has led to a rebound in Indian equities," said Abhimanyu Bhattacharya, partner at Khaitan & Co., a law firm advising on ECM deals. The expiry of lock-in periods for recently listed companies is expected to push more block trades into the market. Large investors may now look to encash stakes in startups and tech companies listed in 2023. Recently listed online food delivery player Swiggy's six-month lock-in period for non-promoter, pre-IPO shareholders expired on 12 May. Read this | From drought to revival: Are QIPs paving the way for new listings? 'The volume of IPOs last calendar year (~$20 billion) will see lock-up expiry, which will provide supply of block deal paper," said Mahesh Natarajan, managing director and head, ECM, Nomura. He added that several companies that adjusted their IPO sizes—both in the primary and secondary markets—are likely to return to the market once their lock-in periods end. Bankers believe block trades act as leading indicators of a broader revival in ECM activity. Block deals are faster to execute, offer immediate liquidity, and provide clear pricing—especially when there is strong institutional interest. In comparison, IPOs demand deeper investor scrutiny and have seen lukewarm traction in recent times. Qualified institutional placements (QIPs), on the other hand, remain a flexible tool as they are largely opportunistic and driven by company-specific funding requirements. 'Unlike block trades, IPOs/QIPs typically have a slightly longer lead time due to regulatory requirements," explained Chirag Negandhi, MD, JM Financial. With the recent market uptick, he anticipates a wave of ECM launches to gain traction. Also read | QIPs by state-owned banks: A push for compliance but little upside for investors Since its September peak till the end of April, the Nifty 50 has slipped 7%. Meanwhile, the market's fear gauge-India VIX-has surged 52%, signalling a sharp rise in market volatility and investor unease. Since the beginning of May, Nifty 50 has recovered 3% of those losses and is now down 4.6% since the September peak. Owing to the volatility, over the past quarter IPO activity has slowed even as a number of companies have taken steps for a public listing in the near term. Since then, the public markets have seen some recovery. Law firms advising on capital market deals say IPO and QIP pipelines remain soft, but strong block deal momentum could turn the tide if markets stay stable over the next few months. 'The other segments, including IPOs and QIPs, have been slower over the last few months due to the correction in the market. If there is an upward movement and stability demonstrated, all ECM categories may eventually see upward traction," said Birbahadur Sachar, partner, JSA Advocates & Solicitors. Read this | FII game plan: Sell stocks for profit, bet on IPOs, discounted QIPs, block deals Amit Ramchandani, managing director and chief executive officer, investment banking, Motilal Oswal Financial Services, believes, 'Block deals increase after companies declare results as many of these deals are done by insiders who are prohibited to sell the stock after quarter end till declaration of results". He added that key concerns—whether related to Pakistan, tariffs, or foreign investment flows—have now been addressed. And with strong scale and growth potential, India is well-positioned to attract capital.
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Business Standard
05-05-2025
- Business
- Business Standard
Buybacks down to a trickle after tax tweak shifts burden to shareholders
Share buybacks have all but disappeared following a rule change on October 1 last year that shifted the tax burden from companies to shareholders. Under the revised norms, buyback proceeds are taxed as dividends at the shareholders' applicable income-tax rates, significantly increasing the liability for high-networth individuals and institutional investors in the highest tax bracket. Since the change, only two buybacks have been completed: A ₹360 crore repurchase by ferro alloys manufacturer Nava and a ₹72 crore offer by online matrimonial services provider 'Buybacks have dried up since the tax-rule change, which aligned their taxation with dividends. Despite a bear market since October — a period when buybacks typically thrive — activity has been negligible,' said Pranav Haldea, managing director, Prime Database. Dividends and buybacks constitute the primary mechanisms for returning excess cash to shareholders. The new structure seeks to eliminate the tax arbitrage between the two routes. Currently, companies incur no tax outgo on dividend payments, which are taxed solely in the hands of the recipient in accordance with their income bracket. With the parity in tax treatment, market participants are preferring dividends as the more efficient vehicle for capital distribution. Unlike buybacks, dividends do not require the appointment of merchant bankers, face fewer compliance requirements from the Securities and Exchange Board of India (Sebi), and can be executed at a greater speed. Buybacks, in contrast, are administratively heavier and typically take several weeks to complete. Between FY17 and FY19, the share of buybacks in total shareholder rewards increased significantly due to a tax differential. From April 1, 2016, the government introduced an additional 10 per cent levy on dividends, pushing the effective dividend distribution tax (DDT) to 20.6 per cent, while listed company buybacks remained tax-exempt. The proportion of buybacks in total shareholder rewards in FY16 stood at just 1 per cent, rising to an average of 25 per cent over the FY17-FY19 period. To address this tax imbalance, the government imposed a 20 per cent buyback levy from April 1, 2019. Nevertheless, buybacks remained attractive for cash-rich firms as the tax liability rested with the company, not those tendering their shares. The most recent shift in tax incidence has, once again, altered the landscape. A buyback entails a company repurchasing and extinguishing its own shares, thereby reducing its equity base and enhancing metrics such as earnings per share (EPS) and return on equity. 'Companies now prefer dividends to buybacks. The EPS boost from buybacks is marginal, as the buyback amount is small relative to market capitalisation,' said Deepak Jasani, former head of retail research at HDFC Securities. The remaining strategic rationale for buybacks, he said, lay primarily in enabling promoters to consolidate their holdings by not tendering their shares. 'Only firms where promoters seek to raise their stake are likely to pursue buybacks. Otherwise, dividends involve simpler procedures and fewer compliances,' Jasani added.
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Business Standard
02-05-2025
- Business
- Business Standard
DIIs overtake FPIs as dominant investors in Indian markets in March quarter
Domestic institutional investors (DIIs), mostly mutual funds and insurance companies, overtook foreign portfolio investors (FPIs) in ownership of NSE-listed companies in the March quarter of 2025. According to Prime Database, DIIs held a 17.62 per cent stake, up from 16.89 per cent in the December 2024 quarter. FPI ownership stood at 17.22 per cent. It is the first time DIIs have outpaced FPIs since Prime Database began tracking data in 2009. The value of DII holdings reached Rs 71.76 trillion, 2 per cent higher than FPIs. A decade ago, in March 2015, the ownership gap peaked at 1,032 basis points, with DII holdings valued at half of FPIs'. Since then, FPIs have steadily reduced their stakes in Indian equities. 'For years, FPIs have been the largest non-promoter shareholder category in the Indian market with their investment decisions having a huge bearing on the overall direction of the market. This is no longer the case. DIIs along with retail (individuals with up to Rs 2 lakh shareholding in a company) and high-net-worth individuals (HNIs) (more than Rs 2 lakh) investors have now been playing a strong countervailing role with their share reaching an all-time high of 27.10 per cent as on March 31, 2025. While FIIs continue to remain an important constituent, their stranglehold on the Indian capital market has come down,' said Pranav Haldea, managing director of PRIME Database Group. Domestic mutual funds also achieved a milestone in the March quarter, with their ownership in NSE-listed firms reaching 10.35 per cent — a double-digit figure for the first time. "Historically, FPIs have significantly influenced market movements with their inflows and outflows. However, their dominance is waning. DIIs, including mutual funds, insurance companies, and retail investors through systematic investment plans (SIPs), are providing a stabilising force against global volatility," said Trivesh D, chief operating officer of Tradejini. He noted that increasing local ownership is reducing market volatility. "As direct public and HNIs participate more, Indian investors are taking ownership of the market, making it less susceptible to FPI exits. Unlike FPIs, who can withdraw abruptly, DIIs tend to be more stable. This was evident in October 2024, when domestic investors absorbed over Rs 1 trillion in FPI selling, preventing market turmoil."
