The end of employee quota in initial public offerings (IPO) of companies is around the corner, with Securities and Exchange Board of India (Sebi) planning to revisit the requirement of having a reservation for employees in the public issues by companies.
Confirming the move, a senior official on the condition of anonymity told Hindustan Times that the issue came up for discussion at Sebi’s February 2 board meeting.
“The board advised Sebi to examine the need for having quota for reservation for employees in public issues, particularly when there are other opportunities for rewarding employees like employee stock option plans,” he said.
The official, however, clarified that till such time a decision is taken on the issue, the regulator has been asked to maintain a status quo.
Under existing Sebi regulations, the management of any company has a window of a maximum of 10 per cent of the total issue size to be reserved for the employees. However, this is not mandatory and companies are free to fix the employees quota below 10 per cent.
While companies like TCS and Bank of Baroda offered a 10 per cent reservation for employees, NTPC, Power Finance Corp and Powergrid offered a reservation of less than 2.5 per cent of the total issue size.
“The employee quota is often under-subscribed or is much below the overall subscription levels,” said a senior official at a leading brokerage.