Sebi relaxes norms for preferential issue by firms with stressed assets

Shares thus issued will attract 3-year lock-in period

MUMBAI: SEBI has relaxed the pricing methodology for preferential issues by listed companies having stressed assets and also exempted the allottees of preferential issues from open offer obligations in such cases, with immediate effect.

Sebi said the new framework is aimed at helping stressed companies raise capital through timely financial intervention, at the same time protecting the interest of shareholders.

Eligible listed companies having stressed assets will be able to determine pricing of their preferential allotments at not less than the average of the weekly high and low of the volume weighted average prices of the related equity shares during the two weeks preceding the relevant date.

The allottees of preferential issue in such eligible companies will be exempted from making an open offer if the acquisition is beyond the prescribed threshold or if the open offer is warranted due to change in control, in terms of Takeover Regulations.

The preferential issue can only be made to persons/entities that are not part of the promoter or promoter group. Sebi added that un-discharged insolvents, wilful defaulters, fugitive economic offenders, those disqualified to act as directors, prohibited by SEBI from trading in securities and accessing the securities market, will be ineligible for such allotment.

However, the resolution for the preferential issue at the said pricing and exemption from open offer shall be passed by a majority of the minority.

Proposed end-use of proceeds of such preferential issue should be disclosed and more importantly, the proceeds should not be used for any repayment of loans taken from promoters/ promoter group/ group companies.

Sebi said the shares issued to the investors in such an issue shall be locked in for a period of three years from the latest date of trading approval granted by all the stock exchanges where the specified securities are listed.

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