The primary market advisory committee, set up by the Sebi, today decided to make these recommendations to the SEBI board. The board will take a final decision on these issues.

The committee, under the chairmanship of MS Verma, decided to recommend that compulsory dematerialisation may be considered for all issues upto Rs 25 crore. This view was taken considering the fact that the distribution of smaller issues under the existing guidelines already is confined to limited number of centers which have necessary infrastructure facilities relating to depositories. The committee decided not to recommend larger issues from the ambitof compulsory demat in view of the widespread geographical coverage required for distribution and lack of adequate infrastructure facilities available across the country. ``For relatively smaller issues it should be manageable as they will have five collection centres in major metros and cities where at least one depository participant is available,'' said Sebi chairman D R Mehta.

The committee also considered various requests from the market participants to relax the requirement of offering 25 per cent of the securities for the purpose of the listing and replace the same with other criteria. The primary market committee deliberated the issue in detail and the majority view was to recommend to Sebi to initially relax the requirement for companies in information technology, media and telecommunication sectors subject to offer to the public is not less than 10 per cent of the securities issued, a minimum number of 20 lakh shares is offered to the public and that the size of the net offer to the public is notless than Rs 30 crore.

``The rationale behind such a view is to ensure that there is enough floating stock and prevent talent from migrating. In industries like information technology some companies may list abroad and avoid listing in the domestic market. In which case the ESOP facility will not be available for domestic employees, leading to migration of talent,'' explained Mehta.The committee further recommended that debt should be listed before equity. "Currently, infrastructure and municipal corporations can list debt before equity, subject to certain requirements. The committee had received various representations from the market participants to allow unlisted companies to offer debt before equity," said a committee member.

The committee after considerable deliberations decided to recommend to SEBI to permit listing of debt before equity subject to the condition that the debt instrument is rated not below a minimum rating of `A' or equivalent thereof.

The committee also invited suggestions fromthe members to make book-building more popular. Specific requirements of disclosing the demand on daily basis and the existing provision for reserving 15 per cent as part of the book building process were identified by the members as some of the reasons why this concept is not picking up. The committee decided to recommend to Sebi to consider reviewing these requirements to facilitate the process.

Demat expansion next month

MUMBAI: The SEBI is likely to expand the list of shares for compulsory trading in the dematerialised form from August. The list will be expanded to cover almost all the scrips listed in the A group of the BSE which are under carry forward business. SEBI had earlier postponed expansion of demat list following delay on the part of registrars and companies in immobilising shares.

The regulator is likely to take up this issue only after inter-connectivity is established between the two depositories - Central Depository Services Ltd (CDSL) and National Securities Depositories(NSDL). With a huge backlog of demat shares pending with registrars, Sebi is going slow on the expansion of the demat list. The inter-connectivity between the two depositories is expected to be established by August 7.