India plans bigger institutional role in public offers by small firms, sources say

Business Recorder reports that India's markets regulator is considering applying some rules now used for large companies to public offers by smaller businesses. One option under review is a quota for institutional investors ahead of share sales, according to two people familiar with the discussions who asked not to be named.

The regulator is also weighing a higher ceiling on the size of companies allowed to list on platforms built for small firms, along with stiffer operating profit requirements before listing. The proposals follow regulatory cautions that small firms were diverting money raised in public markets, as well as an inquiry into investment banks that levied unusually steep fees and inflated subscription numbers. Similar debates are under way elsewhere, with Hong Kong's exchange questioning whether it needs a junior market.

Under the proposals described, up to 50 per cent of a small company's share issue could be earmarked for qualified institutional buyers, with 60 per cent of that institutional portion going to anchor investors who commit before the offer opens. Retail investors would receive 35 per cent and non-institutional investors 15 per cent. Companies could list only if their average profit reached at least 30 million rupees across the last three years, while the post-issue capital test could instead rest on a market capitalisation of 10 billion to 40 billion rupees.