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Over The
Counter Exchange of India
The OTC Exchange of India (OTCEI) incorporated under the provisions of
the Companies Act 1956, is a public limited company. It allows listing
of small and medium sized companies. The minimum issued share capital
required of a company that wants to be listed on OTCEI is Rs.3 million
and the maximum Rs.250 million.
Companies engaged in investment, leasing, finance, hire purchase,
amusement parks etc., and companies listed on any other recognized stock
exchange in India are not eligible for listing on OTCEI. Also, listing
is granted only if the issue is fully subscribed to by the public and
sponsor.
OTCEI is promoted by the Unit Trust of India, the Industrial Credit and
Investment Corporation of India, the Industrial Development Bank of
India, the Industrial Finance Corporation of India and others and is a
recognised stock exchange under the SCR Act.
Benefits:
- The OTCEI has set up a national,
automated screen based and ringless stock market. It helps companies
raise finance from the capital market in a cost effective manner and
provides a convenient and effective avenue of capital market
investment for investors at large.
- While the other recognised stock
exchanges require that in order to have its securities listed the
company should have an issued capital of not less than Rs. 3 crores
out of which normally 25% is to be offered to the public, the
minimum issued equity share capital of a company for eligibility for
listing on the OTCEI is Rs 30 lacs.
- Listing on OTCEI is advantageous to
companies because of the high liquidity of these securities, which
is a result of compulsory market making, improved access and speed
of transactions resulting from the extensive network of
electronically interlinked counters.arial
- Companies can obtain a fair price
of their securities by negotiating the same with the sponsors (who
are members of the OTCEI) and save unnecessary issue expenses by
placing their securities with the sponsors who will in turn off load
the securities to the public. This mechanism is now popularly known
as a bought out deal.
- OTCEI's wide computerized net work
will be spread all over India and will make investment easier. All
deals will be entered into through remote terminals which will be
connected to the mainframe computer of the OTCEI. The exchange will
enable transactions to be completed quickly and investors can settle
the deals across the counter within a few days. The exchange will
also provide liquidity to investors as every scrip listed on the
OTCEI will have at least two makers who will continuously give two
way quotes.
Securities:
Several public sector undertakings have issued "debt instruments"
commonly known as PSU bonds. These bonds are securities as defined under
the SCR Act. Interest earned on some of these PSU bonds are not liable
to income tax.
Euro-issues:
A large number of Indian companies are considering the issue of
Euro-issues in order to finance their foreign exchange requirements.
Blue chip companies initially allowed to enter the market include Grasim
Industries and Tata Iron. Several international bankers and other
organisations have approached the above companies indicating their
keenness to price and underwrite the issues. |
