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Informist, Monday, Sept. 30, 2024

--SEBI reduces timeline for rights shr issue to 23 days from co board's nod

--SEBI:Cos can allot undersubscribed rights shr issue portion to any investor

MUMBAI – Companies coming out with rights issues will soon have the flexibility of allotment of the undersubscribed portion to non-shareholder investors. The companies will, however, have to cut the timeline of rights issues to 23 working days from the date of the board approving the issue from the current average of 317 days. The board of the Securities and Exchange Board of India which met today approved these proposals. The date of implementation will, however, be specified by the SEBI later.

The market regulator had earlier, in a consultation paper where these proposals were made, said the rights issues should be the preferred mode of raising funds by listed companies, against the current preference of companies to raise further equity capital through qualified institutional placement and preferential allotments. With the board giving its approval for flexibility, any specific investor, whether strategic, institutional, or public, will be able to participate in rights issues.

This will, however, be subject to appropriate disclosures by the companies through advertisements. Promoters too will be allowed to renounce their rights' entitlement to any specific investor or investors.

The SEBI board also approved a tightening of norm proposal where all listed companies coming out with rights issues, regardless of issue size, will have to appoint a monitoring agency to monitor the use of proceeds of the issue. Further, rights issues of issue size less than INR 500 million rupees which are currently out of the purview of the SEBI's issue of capital and disclosure requirement norms will get included.

To make compliance of the shortened timeline easy, the SEBI will allow companies to file the draft letter of offer with stock exchanges for their in-principle approval and not have to file it with the SEBI for issuance of its observation. Further, companies have been given the flexibility to dispense with the mandatory requirement of appointment of a merchant banker to manage the rights issue.  End

Reported by Rajesh Gajra

Edited by Manisha Baxla

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