All stocks should have face value Re 1: Sebi panel

[K.Karthik Raja]

All stocks should have face value Re 1: Sebi panel

The face value of shares of all listed companies may soon be Re 1 if a
proposal by the Priamary Markets Advisory Committee, or PMAC, is
accepted by the Sebi board. The move aims to ensure uniform face
values, so that investors can make informed stock comparisons. CNBC-
TV18's Shishir Sinha and Abhijit Neogy report that the move could also
result in greater public float of listed companies.

It could well be the first major policy decision that CB Bhave the new
Sebi Chairman has to make, something that could change the way the
Indian capital markets operate.

In a far reaching move, PMAC, a sub-committee under Sebi, recommended
to the Sebi board that the face value of shares should be Re 1 for all
listed companies. The proposal will now be considered by Sebi in 2-3
weeks time.

Sources say the proposal if it gets through will mean that companies
which have a face value of more than Re 1 will have to go in for a
stock split. The aim of this move is to ensure uniform face values so
that investors can make informed stock comparisons. The move could
also result in greater public float of listed companies.

Sources in the PMAC said the ultimate aim is to do away with the face
value concept. Stock exchanges abroad do not have the concept of fave
value, so any fresh listing does not carry either a premium or a
discount with it. The PMAC wants Sebi to benchmark its policies to
this international best practice.. The other important fallout wiil be
that the public float of stocks will go up, something the government
has always wanted, though the market capitalization will remain the
same.

The good news is that this will not be an accounting nightmare. Heads
of tax practices of top accounting firms have told CNBC-TV18 that the
move if adopted will not require a major accounting overhaul though
some book adjustments will still have to be made.

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