Sebi proposes demat for pre-public offer shareholders

Mumbai: The Securities and Exchange Board of India (Sebi) has proposed mandating the dematerialisation of shares held by key shareholders including promoters, directors and qualified institutional buyers prior to an initial public offering (IPO). It said stock brokers, non-banking financial companies and any other regulated entities that hold securities will also be required to have such holding in dematerialised form prior to the filing of the offer document.

"In spite of several regulatory mandates and facilitation mechanisms being in place, there remains a significant volume of holding of physical shares even among critical pre-IPO shareholders such as directors, key managerial personnel, senior management, selling shareholders, and even qualified institutional buyers. This leaves a regulatory gap that allows a good volume of physical shares to continue existing post-listing," Sebi said in a discussion paper on Wednesday.

Sebi will amend rules to include these category of shareholders, so as to bring more shareholders under the dematerialisation mode and reduce the volume of physical shares from the listing space.