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Easier listing norms to attract retail investors?

The government and capital markets regulator Securities Exchange Board of India (SEBI) are considering easing listing norms to encourage companies to raise money through equities traded on stock exchanges. Mahua Venkatesh reports.

business Updated: May 22, 2011 21:50 IST
Mahua Venkatesh

The government and capital markets regulator Securities Exchange Board of India (SEBI) are considering easing listing norms to encourage companies to raise money through equities traded on stock exchanges.

The move is aimed at deepening equity markets, as also into goading households to invest a part of their savings in the capital markets.

“The government and the market regulator are looking into the possible impediments that are discouraging companies from lisgint,” a senior corporate affairs ministry official told HT, requesting not to be identified.

SEBI is looking into the constraints that firms cite in getting listed on exchanges. The market regulator will likely prepare a report, based on which the listing norms could be eased, the official said.

Disclosure norms and levels of compliance could be made different for different companies depending on their sizes.

There are many highly valued Indian companies — such as Tata Sons — which are not listed on stock exchanges. Less than 10,000 Indian companies are listed on the exchanges.

A large number of other companies are not listed on stock exchange despite fulfilling all the necessary criteria.

“Many firms have cited high cost of compliance as a deterrent in getting their companies listed on stock exchanges to raise capital,” the official said.

These firms have preferred to borrow from banks or tap the private equity and venture capital markets.

The government is keen to channelise a larger chunk of household savings into the stock market. This is at present miniscule, though not quantified.

The average Indian saves about a quarter of what he or she earns — about R11,000 per year out of an estimated average income of R43,749.

About 12% is spent on weddings, social ceremonies and unusual medical expenses. Indians like to stock up on cash with only 3% of the household income going into small savings instruments, stocks or insurance policies.

In 2007, as many as 95 companies floated initial public offerings (IPOs) as a bull run swept the broader economy.