The Securities and Exchange Board of India (SEBI) is considering the possibility of introducing fractional shares in India, a move aimed at making costly or high-priced shares accessible to everyday retail investors as reported in Business Today.
Fractional trading allows investors to purchase a portion of a share. For example, at present, a single share of MRF is priced at approximately ₹1.09 lakh, which means that anyone looking to acquire a share in the tire industry giant must invest more than ₹1 lakh.
If fractional ownership is permitted, one could invest, for instance, ₹25,000 and acquire a quarter or even smaller fractions of a share. In fact, several Indian companies have individual share prices exceeding ₹20,000, including Page Industries ( ₹39,612), Honeywell Automation India ( ₹39,308), Shree Cement ( ₹25,681), Abbott India ( ₹22,800), and Nestle India ( ₹21,922), among others.
Fractional ownership is already allowed in the US markets, and numerous Indian investors have invested in fractional shares of well-known companies such as Apple, Meta (formerly Facebook), and Alphabet, among others.
SEBI Chairperson Madhabi Puri Buch, addressing the Global Fintech Forum in Mumbai, expressed a keen interest in implementing this concept in India. However, she noted that it would necessitate amendments to both the SEBI Act and the Companies Act.
“Something that we were very keen to do, we could not do. So, for instance, fractional shares. Somebody came up with that (and) we thought it was a good idea. We would have wanted to welcome them into the innovation sandbox but it is not permitted in the SEBI Act itself. Not until we change the Act and not just the SEBI Act but also the Companies Act. But, taking the learning from that we are actually looking… in the SEBI Act is there in some way in which we can now incorporate something of this nature,” said Buch.
The SEBI Chairperson’s remarks were made in the context of the regulator’s innovation sandbox facility, which enables entities to introduce their innovations and assess their viability within the stock market ecosystem.
It should be noted that conversations regarding fractional ownership are currently in their early stages. This is of particular importance because fractional ownership is seen as an evolutionary step beyond the presently allowed share ownership format.
Interestingly, fractional ownership concepts are already present in various other asset classes, including real estate. Some startups even provide platforms for investors to engage in fractional investments in physical assets.
Real Estate Investment Trusts (REITs) also provide investors with the chance to own a portion of larger real estate ventures.
