SEBI unveils norms for listing preference shares
NEW DELHI, March
9, 2013
With an aim to bring in more
transparency in raising of funds through non-convertible preference shares,
market regulator SEBI, on Friday, announced a new set of regulations to govern
issuance and listing of such securities.
To safeguard the interest of
small investors from such high-risk securities, SEBI also said the listing of
privately placed non-convertible redeemable preference shares would require a
minimum application size of Rs.10 lakh for each investor.
Besides, the public issuance of
such shares would require a minimum three-year tenure for the instruments and a
minimum rating of ‘AA—’ or equivalent investment grade, the market regulator
SEBI said in a statement after its board meeting here on Friday.
There have been many instances of
public investors being taken for a ride through sale of such shares, as there
has been ambiguity about regulations governing them.
At the same time, a defined
framework for issuance and listing of such shares would also make it easier for
banks and infrastructure companies to garner funds through this route.
A preference share is an equity
security with properties of both an equity and a debt instrument. It usually
carries no voting rights, but may carry a dividend.
SEBI said that its board had
approved the SEBI (Issue and Listing of Non-convertible Redeemable Preference
Shares) Regulations, 2013, to provide a comprehensive regulatory framework for
issuance and listing of non-convertible redeemable preference shares.
SEBI said the new regulations
would be applicable to issuances by banks of non-equity instruments such as
perpetual non-cumulative preference shares and innovative perpetual debt
instruments, which are in compliance with the specified criteria for inclusion
in additional Tier I capital.
Such instruments can be issued by
banks to meet Basel III norms. Indian companies have raised over Rs.25,000
crore through preference share issuance in the last three years. — PTI
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