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Informist, Friday, Aug 2, 2024

 

--SEBI Buch: IPO applications returned in 2024 at 16 

--CONTEXT: Comments by SEBI chief Buch at FICCI capital market event 

--Buch: SEBI returns IPO applications if incomplete or non-diligent 

--SEBI Buch: Mulling nod for combined rights-preferential allotment 

--SEBI Buch: Mulling demystified, templated IPO offer documents 

--SEBI Buch: Accepted 66% of 16 industry standard group suggestions 

--SEBI Buch: Creating new intermediary, performance validation agency 

--SEBI Buch: Performance validation to verify claims of returns 

 

MUMBAI – The Securities and Exchange Board of India is considering allowing a combined rights issue and preferential allotment by listed companies, to facilitate the process in case of rights issues not getting subscribed fully, according to its Chairperson Madhabi Puri Buch. The preferential allotment will, however, be permitted to existing shareholders, Buch said. The SEBI chairperson was speaking at a capital market conference in Mumbai today.

 

SEBI will issue a consultation paper on the same soon, she said. In the combined offer, the flexibility of pricing and shareholder approvals available to companies to come out with rights issues will be available for issuing shares on a preferential basis, but to existing shareholders only, and also limited to the unsubcribed portion of the rights issue.

 

The thinking behind such a facilitation came from within SEBI, Buch said. Currently, the norms for preferential allotment of shares to investors by listed companies are more stringent than those for rights issues. The proposal is to keep a short timeline of 23 days for the combined offer, Buch said. But the company will still have to detail the purpose of the issue and the use of funds in the combined offer issue, she said.

 

SEBI was also soon going to create a new market intermediary--performance validation agency--to allow for low-cost verification of claims of alternative investment funds, portfolio managers, investment advisors, algorithm software providers, real estate and infrastructure investment trusts, and others. SEBI has been working on this since the last one year.

 

According to Buch, multiple entities will be permitted to register as perfomance validation agencies and the costs will have to be kept affordable for market intermediaries. The SEBI chief said that there was also a proposal on a demystified initial public offering prospectus following a fixed template.

 

Buch said that although the template will be fixed, if an issuer cannot fit in certain complex information within the templated document, there will be an additional column for the complexity to be articulated. Buch said that initial public offer applications still contained incomplete information or inaccurate information. SEBI returns such applications to the issuers, and so far in 2024, 14 applications were returned, she said.

 

The SEBI chief noted that the 16 working groups of intermediaries formed to suggest changes in, or new, industry standards were giving recommendations to SEBI and so far the market regulator had accepted 66% of their recommendations.  End

 

Reported by Rajesh Gajra

Edited by Aditya Sakorkar

 

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