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SME IPOs may get more anchor investment
Why in the news ?
- The Securities and ExchangeBoard of India (SEBI) recently took a decision to reduce the minimum anchor allocation size in initial public offers (IPOs) by small and medium enterprises (SMEs).
- The decision has come as a shot in the arm for the segment.
- An Initial public offering, or IPO, is the very first sale of stock issued by a company to the public.
- Initial public offering is the process by which a private company can go public by sale of its stocks to general public.
- It could be a new, young company or an old company which decides to be listed on an exchange and hence goes public.
- Anchor investors or cornerstone investors (as they are called globally) are marquee institutional investors like sovereign wealth funds, mutual funds and pension funds that are invited to subscribe for shares ahead of the IPO to boost the popularity of the issue and provide confidence to potential IPO investors.
More on news
While there has been increasing participation from institutional investors like mutual funds and foreign portfolio investors (FPIs) in the SME IPO segment, only nine among the more than 410 such public issues that have hit the market till date managed to get anchor investors .
SEBI, in its board meeting , decided that the minimum anchor investor size would be reduced from Rs.10 crore to Rs.2 crore for SME IPOs.
It will attract more organised investors to SME stocks and further provide fundamental strength to this developing marketplace.
The SME segment, that was unveiled separately in 2012 by BSE and the National Stock Exchange (NSE), has shown signs of maturity with many institutional investors coming in.
Recently, fund houses like HSBC Mutual Fund, DSP BlackRock Mutual Fund and Sundaram Mutual Fund had subscribed to some SME IPOs.
Mutual Funds
- A mutual fund is an investment vehicle made up of a pool of moneys collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments and other assets.
- Mutual funds are operated by professional money managers, who allocate the fund's investments and attempt to produce capital gains and/orincome for the fund's investors.
- A mutual fund's portfolio is structured and maintained to match the investment objectives stated in its prospectus.
Source
The Hindu, Indian Economy.