Sebi announces measures to fast-track rights issues
MUMBAI: Securities and Exchange Board of India (Sebi) has announced measures to help fast-track and ease right issues even as the market regulator also extended the regulatory approval validity for launch of IPOs and rights issue by six months in the wake of coronavirus pandemic.
Sebi said the new steps have been prompted by requests from various industry bodies in the wake of the prevailing economic scenario.
Sebi has reduced the size of minimum average market cap of public shareholding required to qualify for rights issue from the existing Rs250 crore to Rs100 crore.
The new relaxations are applicable to right issues that open on or before March 31, 2021.
Sebi hopes the new measures will further facilitate fund raising from capital markets in the backdrop of unfavourable market conditions engendered by COVID 19.
Rights issue can take off after 18 months of listing
While the requirement of three years of listing of equity shares of the issuer has been reduced to just eighteen months, the
condition that no audit ‘qualifications’ should be there on issuer’s audited accounts has been replaced with the requirement to disclose the impact of audit qualifications on issuer’s financials.
Auditors ‘qualify’ financials of a company when serious shortcomings are found in the financials.
To provide greater flexibility in fund raising, the threshold for minimum subscription requirements for a rights issue has been reduced from the existing 90 per cent to 75 per cent of the offer size, subject to certain conditions.
To reduce the time involved in fund raising and ease compliance requirements, listed entities raising funds up to Rs25 crore through a rights issue will not be required to file draft offer document. The existing threshold in this regard currently is Rs10 crore.
Flexibility on issue size
An issuer, whose offer document is pending receipt of SEBI observation, shall be permitted to increase or decrease the fresh issue size by up to 50 per cent of the estimated issue size (instead of the present limit of 20 per cent) without requiring to file fresh draft offer document with Sebi.
“This relaxation shall be applicable for all offer documents pending receipt of SEBI observations up to December 31, 2020,” Sebi circular added.