SEBI proposes framework for price discovery of shares of Investment Companies
Markets regulator Securities and Exchange Board of India (SEBI) has proposed to lay a framework for price discovery of shares of listed investment companies (ICs) and listed investment holding companies (IHCs) whose market price is at significant discount to their book value.
ICs are companies that earn major revenue from interest, capital appreciation from investments made, and do not include rental income which is classified under diversified commercial services. IHCs are holding companies with holding of 51 percent or more in other company.
In the draft norms, SEBI said a special call-auction mechanism without price band may be enabled for listed ICs and IHCs, whose shares are trading beyond a certain discount to their book value. For this, stock exchanges will co-ordinate amongst themselves and provide the special call-auction mechanism for such companies.
The concept of price bands had been put in place as a risk management and surveillance measure for ensuring orderly trading, appropriate price discovery and promote market integrity.
SEBI also suggested certain criteria for identification of ICs and IHCs eligible for special call auction. “The scrip should have been listed and available for trading at least for a period of 1 year and the company should have been compliant with all the LODR (Listing Obligation and Disclosure Requirement) Regulations including submission of audited financial results,”. Total assets of the company invested in shares of other listed companies may at least be 50 percent. The 6-month VWAP (volume weighted average price) of the security may be less than 50 percent of the book value of such companies.
SEBI has sought comments from various stakeholders by May 10, 2024.
