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Govt looks to make FPOs more attractive to retail investors

Normally, FPOs take six months to finally hit the market. This is a long process which involves a heavy documentation. Even Sebi had initiated some steps in this direction two years back where it fast tracked the mechansim for bigger issuances.

Despite the Indian equity markets posting their best rally over the past few days, retail participation hasn’t been as expected. Thus to attract more retail participation in processes like a follow-on public offer (FPO), the finance ministry is in consultation with the market regulator, Securities and Exchange Board of India (Sebi) to make the FPO process more attractive.

Normally, FPOs take six months to finally hit the market. This is a long process which involves a heavy documentation. Even Sebi had initiated some steps in this direction two years back where it fast tracked the mechansim for bigger issuances.

Sebi had reduced the timeline for big issuances to three weeks from current six months and now it is learnt that the government is considering reducing the timeline significantly for all issuances and even making this process cheaper.

Experts say that six months is a lot of time for price sensitive information to leak and many mutual funds (MFs) and foreign institutional investors (FIIs) take advantage of this information and reduce arbitrage bringing retail investors at a disadvantage.

Engineers India was the last FPO in 2013 after which there has been a lull. While the government also goes through the OFS route for stake divestment since it is faster, OFS has not managed to generate enough retail interest. Both, OFS and QIP routes are not helping retail investors, thus the government wants to take these steps and together with Sebi it may come out with guidelines on this soon.

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