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Investment companies established with the purpose of investing in various sectors by collecting money from the general public will not be able to purchase shares in the secondary market. The Securities Board is going to effectively implement the policy of expanding the investment area and prohibiting the purchase of shares in the secondary market by revising the previous policy for investment companies.
Although there is an old rule that investment companies cannot buy and sell shares in the secondary market, that policy has not been implemented effectively. Investment companies openly sell shares in the secondary market was buying
. "Investigation is currently being conducted in relation to investment companies that buy shares in the secondary market against the rules," a board source said.
In the new policy arrangement, for the initial share issue (IPO), the investment company must be proven to be in continuous operation for at least three years and to be profitable in the last two financial years. The net worth per share of the company should be more than the face value. These arrangements are old. The
board has expanded the area in which investment companies can invest. Previously, they could only invest in energy, transport and communication sectors, but now they can invest in primary shares of companies in agriculture, tourism, manufacturing and processing, information technology and mineral extraction sectors.
They cannot invest in the common shares of the company. Founders can only invest in shares. "However, the company will be allowed to participate in the primary shares to be issued through the book building method only if it has been recognized as a qualified institutional investor by the Securities Board," said the new standard issued by the board.
Under the new regime, companies with a credit rating above the minimum can now issue an IPO. This system is more flexible than before. Earlier, there was a requirement to obtain an average rating. Now the company that wants to do public issue should have got a credit rating one level above the minimum and the paid up capital of the company should be at least 500 million rupees.
Similarly, the board has arranged that companies based on foreign investment must prove that they have completed the legal process related to foreign investment and technology transfer. The board claims that the new policy regime will increase transparency in the primary market, strengthen investment protection and ensure capital flow in the primary sectors in the long term.
