Investors may soon be able to buy shares offered through initial public offerings at a fraction of the cost they have paid till now.
The primary markets advisory committee of Sebi has suggested that the face value of all new stocks should be a uniform Re 1 per share.
If accepted, the panel’s recommendations will force all new issuers to offer their shares at an affordable price because of a Re 1 par value.
Reports indicate that the Sebi board will meet in about three weeks to take a decision on the proposal.
This could be the first big decision taken by new Sebi chairman C.B. Bhave who assumed office yesterday.
If Sebi decides to clear the proposal, it will end controversies such as the one that erupted last August when Anil Ambani decided to fix the face value of the Reliance Power stock at Rs 2 and offer it to the public at around Rs 90.
After a barrage of allegations from certain quarters and intervention by the market regulator, the par value of the Reliance Power stock was fixed at Rs 10 and offered to investors in a price range of Rs 405-450 a share.
Since this is a recommendation of the primary markets committee, it won’t immediately affect the companies that are already listed on the bourses.
However, sources say Sebi will have to decide whether to extend the concept to the stocks that are already listed on the bourses. This may take some more time to implement, sources added.
At present, there are ten denominations in the face value of listed stocks: 1, 2, 3, 4, 5, 6, 10, 20, 50 and 100.
However, the rationale for the committee’s suggestion is not to increase liquidity.
Shares of listed companies have different face values within the same industry. For example, the face value of Infosys is Rs 5 per share whereas the par value of Wipro is Rs 2. The committee wants to correct such distortions.
“Having different face values does not help the investor. He may buy into a stock without knowing its actual par value. Therefore, when there is a uniformity, it will be easier for the investor to compare stocks,” said V K Sharma, head of research at Anagram Stock Broking.
Dhiraj Sachdev, vice-president and senior fund manager at HSBC Asset Management, reckoned that the varying face values create confusion in the minds of an investor.
