ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has approved the 2015 Book-Building Regulations which are expected to help promote the primary market and to extend maximum facilitation to Initial Public Offerings (IPOs) in Pakistan.

Book building is a common practice in developed markets and is being used in emerging markets as well.

The decision was taken by the policy board of SECP to amend and upgrade the previous book-building regulations as they are not effectively enforceable due to non-applicability of these regulations to the book runners and non-availability of any penalty clause in them.

The new book building regulations highlight that the total offer size should not be less than 25 million shares and the maximum bid size by a single bidder is 10 per cent of the book-building portion.

The associated companies and associated undertakings of the issuer or the offerer shall not in aggregate make bids for shares in excess of 5pc of the book-building portion. The new law has banned the related employees to participate in the bidding for shares.

These include the employees who are directly involved in the ‘Issue’ or the offer for sale, of the issuer, the offerer, the book runner and sub-book runner.

Under the new law, ‘Person’ eligible to perform the functions of book runner are required to be registered as a book runner with the SECP.

Prospectus is required to be published and circulated just once, that is before commencement of the book-building. The new law has mechanism for pre-registration of the potential bidders with the institution providing the book-building system, and the provision has been included for payment of margin money through online transfer.

Restriction has been imposed on making consolidated bid, that is ‘bid which is fully or partially beneficially owned by persons other than the one named.’

Under the new system, an eligible investor shall not make a bid with price variation of more than 20pc of the prevailing indicative strike price, and the bidding shall remain open for at least two days.

There is a restriction on release of the subscription money that was received against the bids accepted.

The restriction will remain till credit and dispatch of all shares allocated under the retail portion of the issue and issuance of NOC by the relevant securities exchange in case the company is already listed or there is formal trading of the company in case of new listing.

There is restriction on withdrawal and downward revision of bids after 4pm on last day of the bidding period too. A fine up to Rs10m can be imposed on any company which fails to comply with the regulations or which refuses to abide by it.

Published in Dawn, June 30th, 2015

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