Firm Allotment | Preferential Allotment | SEBI Regulation

SEBI Guidelines for Firm Allotment

When a firm issues certain percentage of shares to the public, the remaining shares are allotted to different categories of investors. Such an allotment is known as firm allotment.

Firm allotments are allotments made as per SEBI regulations to different categories of investors. Given below is the percentage of shares that can be allotted to different categories of investors.

1. Foreign financial institutional investors (30%)

2. Development financial institutions (20%)

3. Indian Mutual Funds (20%)

4. Permanent regular employees (10%)

5. 5% for lead bankers.

6. 10% for employees of the promoting companies. The balance can be taken by the promoters.

All these above regulations were made by SEBI through a circular dated 11.10.1993.

SEBI Guidelines for Preferential allotment

SEBI has permitted the issuing company to allot shares on a preferential basis to certain categories of investors, which is known as preferential allotment.

Promoters of companies can have preferential allotment after fulfilling the conditions laid down by Companies Act.

Foreign financial institutional investors (FIIs) are allowed to have preferential allotment of shares, if they are registered with SEBI. A single FII can have 10% preferential allotment. But all Flls put together, can have only 30% preferential allotment. In view of this relaxation, foreign capital inflow increased and as on date in India, the Foreign Exchange Reserves (FER) is more than 65 billion U.S. dollars (I billion = 1,000 million).