Just Dial will adopt a scheme “Safety Net” for retail investors investing in its Rs 900-crore IPO (Initial Public Offering). Just Dial offering safety net provision along with a10% discount on the issue price when many companies had offered only 5% discount in past.
What is Safety Net scheme?
Safety Net is a scheme where the company promoters assure that they will buy back shares from the retail applicants at the IPO price, if its stock falls sharply during the first six months after listing. It was proposed by the market regulator SEBI in 2012.
Sebi had put out draft norms for safety net after its study showed that 62% of 117 companies listed between 2008 and 2011 fell below IPO price within the first six months of listing. The regulator could not make it mandatory after the proposal — the first of its kind anywhere in the world — met with strong criticism from investment bankers.
The buy back under safety net will trigger if volume-weighted price of the share for the previous 60 days on completion of the safety net period of six months is below the allotment price for retail applicants. As of now, it is not mandatory for companies to provide safety net.