SEBI has just proposed to double what it defines as a retail investor …
It plans to define a person investing under 2 lakh instead of the current 1 Lakh, a Retail investor (getting the 5% discount benefit). Read Livemint
Wonder why the sudden need to change the definition? The whole logic is that this will ensure a larger participation of the small investors in IPO markets.
The real reason is simple, our govt is quite in need of cash that it is rapidly guzzling in its misguided but vote bank loving political schemes like the Minimum food guarantee bill and its complex subsidy regime. It wants to disinvest chunks of large PSU companies to fund its excesses.
Take for example Coal India whose size is Rs 15000 crores which it fears that the public wont be able to absorb … remember the IPOs of NHPC (6000 cr) , REC (1600 cr)and likes ? which saw measly public response and large allotments to LIC an d PSU entities. Compare the size and you will get the bigger picture.
So the easier lollypop would be to push SEBI to look like a hero by making it propose such a move , simply to increase the pie of investors it defines as small investors , by allowing some low end HNIs to fit into that slab.
However SEBI does not want to understand that it is not upping the upper limit but giving a larger allotment to small investors that will guarantee greater small investor participation as they would make better profits on listing.
Small investors are hardly rewarded for a high risk investment and get very poor allotments that range between nil and 33% of the investment, forcing them to take larger risk by applying for a larger chunk of shares, that too sometimes on borrowed money.
What is most needed is to change the allotment pattern so that at least half the issue is left for them or better still all small investors get full /pro-rata allotment, forcing the larger guys like fiis/diis etc to buy from the markets.
Lastly the real aam admi / retail guy doesnt know what shares are , and finds the paperwork cumbersome and system intricate, most folks don’t even own a bank account, let alone a demat and securities a/c.
If it wants to be truly investor friendly it is time SEBI focuses on getting such guys to participate in the markets.