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    The Securities and Exchange Board of India is set to raise the limit retail investors can invest in initial public offerings from Rs 1 lakh to Rs 2 lakh, the first increase in five years. Some experts say this will disproportionately benefit wealthy individuals over middle-class investors. They suggest increasing the overall allocation to retail investors from the current 35% to better increase retail participation. Many retail investors support raising the limit as it will allow them to invest more in promising IPOs without dividing applications across multiple accounts.

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    The Securities and Exchange Board of India is set to raise the limit retail investors can invest in initial public offerings from Rs 1 lakh to Rs 2 lakh, the first increase in five years. Some experts say this will disproportionately benefit wealthy individuals over middle-class investors. They suggest increasing the overall allocation to retail investors from the current 35% to better increase retail participation. Many retail investors support raising the limit as it will allow them to invest more in promising IPOs without dividing applications across multiple accounts.

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    Download as DOCX, PDF, TXT or read online from Scribd
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    12 views1 page

    Diwali Gift

    Uploaded by

    amitaggarwal86
    The Securities and Exchange Board of India is set to raise the limit retail investors can invest in initial public offerings from Rs 1 lakh to Rs 2 lakh, the first increase in five years. Some experts say this will disproportionately benefit wealthy individuals over middle-class investors. They suggest increasing the overall allocation to retail investors from the current 35% to better increase retail participation. Many retail investors support raising the limit as it will allow them to invest more in promising IPOs without dividing applications across multiple accounts.

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    of 1

    Diwali gift: retail investors allowed to invest up to 2

    lakh in IPO
    MUMBAI: Retail investors will get to double their bets on initial public offerings as the market
    regulator is set to raise the limit to Rs 2 lakh, the first revision in five years, as it attempts to keep
    pace with the eroding value of the rupee. The proposal, likely to be approved by the board of the
    Securities & Exchange Board of India on Monday, will cut the numerous applications investors
    sometimes make in the name of relatives to get more shares.

    Some say the hike will enrich the wealthy more than the middle class if it is done without an
    increase in the overall allocation for the retail segment, which is capped at 35%. "The richer
    individuals, courtesy proportionate allotment, will further eat into the allocation to the small
    investors, resulting in huge disappointment, due to small or nil allotments," said Prithvi Haldea,
    managing director of Prime Database and a former member of Sebi's primary market advisory
    committee. "If the regulator is keen to increase the retail investor base, it should rather increase
    the reservation for retail investors from 35% to 60-70%."

    Unlike most developed markets where investment bankers have the discretion to allot shares to
    their favored clients in an IPO, the Indian regulator has mandated specified portions that go to
    funds, wealthy individuals and retail investors. But with the upswing in sentiment, retail
    investors have demanded more of the IPO slice. The rate of in-flation has more than doubled to
    12% in the past five years, according to a Sebi discussion paper, which suggested that hiking the
    retail limit might be in order. In case of public issues done on a book-building basis, the rules
    now in place mandate that 35% of the offering should be allotted to retail investors, 15% to non-
    institutional investors and the remaining 50% to institutions.

    "I will be very happy if the limit is enhanced," said Ankur Jain, a finance manager at a real estate
    company in Mumbai. "With the enhancement I will be able to get more shares of good IPOs.
    Also, I don't need to go through the hassles of applying through different accounts."

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