General Information - OTCEI
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.
- 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.
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.
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.