Pref Shares Can Be Listed Soon

Move to make fund-raising easier for cos & banks

Capital market regulator Sebi will allow listing of preference shares on stock exchanges to make it easier for banks and infrastructure companies to raise funds.Preference shares are quasi-equity instruments that have limited voting rights and give specific dividend that is paid out before a company distributes dividend to regular shareholders.Unlike equity and debt,public issue and listing of preference shares are not covered under existing rules. The Sebi board,which is meeting in Delhi on Friday,is expected to approve changes that will pave the way for listing of these securities,as well as permitting infrastructure companies to raise long-term capital through issuance of preference shares with life of over 20 years.There will be demand for listed preference shares from retail investors as the dividend will not be taxed in their hands.Such a security will compete with tax-free PSU bonds, said a senior investment banker.While infrastructure companies can use such capital to finance long gestation projects,banks can consider a slice of preference capital in maintaining capital adequacy ratio.There will be takers for preference shares even if there is trading in the wholesale debt market segment of stock exchanges, said the banker.The Sebi board is also expected to ratify rule relaxation for mutual fund schemes eligible under the Rajiv Gandhi Equity Savings Scheme (RGESS) a programme launched by the government to spread equity cult among retail investors who typically prefer fixed deposits and gold.

Economic Times, New Delhi, 07-03-2013