BSE, NSE put in place measure for enhanced monitoring of companies

Leading stock exchanges BSE and NSE have put in place a detailed framework for shortlisting and reviewing of securities under graded surveillance measures (GSM), wherein investors need to be extra cautious while dealing in such stocks. These additional guidelines have been made after a joint surveillance meeting of markets regulator Sebi with exchanges last week, the bourses said in separate circulars.

Under the new criteria, securities having a networth of less than or equal to Rs 10 crore and net fixed assets of less than or equal to Rs 25 crore are eligible for inclusion under the GSM framework.

Also, securities with a negative price earning (PE); or having a greater than two times PE of benchmark index -- Nifty 500 or S&P BSE 500 --can be included.

Further, the exchanges said securities with full market capitalisation of less than Rs 25 crore can be directly included under GSM stage I.

GSM framework has been made to check any abnormal rise in stock price not commensurate with the company's financial health. The framework has six stages with surveillance action defined for each stage. 

According to the exchanges, securities placed under GSM framework would be reviewed on quarterly basis and securities not meeting the inclusion criteria would be moved out of the GSM framework.

The bourses said public sector enterprises; securities already under suspension; securities on which derivative products are available; firms listed during last one year through initial public offer and those which have paid dividend for each of last three preceding years, will not be included under the framework.

In addition, securities listed through scheme of arrangement involving merger or demerger in last one year will not be included.

"In case of merger of companies, if any of the securities at time of merger is under the purview of GSM, then the same shall be continued on the resultant entity.

" If the parent company is under purview of GSM, the resultant demerged companies shall also attract GSM. If the parent firm is not under purview of GSM, the resultant demerged companies shall not be part of GSM at the time of demerger and shall be considered during the subsequent quarterly review," the exchanges said.

Last month too, the exchanges came out with some guidelines in this regard.

In June, Sebi had initiated a probe into the alleged leak of 37 companies that were brought under enhanced surveillance before the stock exchanges made the list public.

It was alleged that stocks that were to be included in additional surveillance measure were leaked to market operators before the official announcement was made by the stock exchanges.