Regulations
SEBI issues framework for rejection of draft offer proposals

SEBI said draft document of companies would not be entertained in case major portion of the issue proceeds are utilised for expenses towards brand building, advertisement and payment to consultants

 
New Delhi: Companies will not be able to access the capital market if the utilisation plan is too long or if they intend to use the proceeds for brand building and advertisements, reports PTI.
 
Market regulator Securities and Exchange Board of India (SEBI) in the 'Framework For Rejection Of Draft Offer Documents Order, 2012' has listed various factors that could lead to disapproval of draft offer papers for fund-raising by companies.
 
SEBI in its order dated 9th October has said that an offer document could be rejected if the purpose of utilising the proceeds is vague.
 
It said draft document would not be entertained in case a major portion of the issue proceeds are proposed to be utilised for the purpose which does not create any tangible asset, like expenses towards brand building, advertisement, payment to consultants.
 
The draft document would be rejected if there is not enough justification for creation of such assets in terms of past performance, experience and concrete business plan of the issue. 
 
The draft papers could also be rejected if the proposed issue proceeds are intended to be utilised for plants which have no "crucial clearances/licenses/ permissions/ approvals from the required competent authority" at time of filing of papers.
 
Another criteria for rejection, SEBI said, would be on the basis of audit reports doubts or concerns have been raised over the accounting policies of the company.
 
"This would also be applicable for the subsidiaries, joint ventures and associate companies of the issuer which significantly contributes to the business of the issuer. This would also be applicable for the entities where the issue proceeds are proposed to be utilised," SEBI said.
 
SEBI said the list of draft offer documents rejected on the basis of the framework, along with the details of issuers or merchant bankers and the reasons for rejection, would be made public on the market regulator's website.
 
Among others, the market regulator would not entertain proposals where the issuer is unable to provide satisfactory replies and clarifications in case there is sudden spurt in the business just before filing the draft offer document.
 
"This will include spurt in line items such as income, debtors/creditors, intangible assets, etc," the order said.
 
Further, change in accounting policy with a view to show enhanced prospects for the issuer in contradiction with accounting norms is another criteria under the framework.
 
SEBI said draft offers will be rejected if majority of the business is with related parties or where circular transactions with connected or group entities exist with a view to show enhanced prospects of the issuer.
 
Another reason for not approving the draft offer document would be if the issuer's survival is dependent on the outcome of the pending litigation or such a thing is wilfully concealed or covered.
 
Existence of circular transactions for boosting the issuer's capital/net worth apart from premises that ultimate promoters are unidentifiable would also invite rejection, SEBI said.
 
Other factors that could lead to rejection of offer documents include failure to provide complete documentation, furnishing of incorrect information and "failure to resolve conflict of interest, whether direct or indirect, between the issuer and merchant banker appointed by the issuer to undertake the book building process".
 
SEBI said that quantification of conflict of interest may not always be possible but it would largely depend upon the board's assessment on whether such conflict of interest may affect the judgement and ability of the merchant banker in conducting due diligence activity of issuer.
 
The norms are aimed at protecting the interest of investors besides ensuring the adequacy and quality of disclosures in the offer documents.
 
The norms are part of SEBI (Framework For Rejection Of Draft Offer Documents) Order, 2012. Issued on October 9, the general order has come into immediate effect.
 
The market regulator said it would provide one-time opportunity to issuers for withdrawal of draft offer documents pending with the board.
 
The offer documents can be withdrawn within one month from the issue date of this general order, it added.
 
Meanwhile, entities whose draft offer documents are rejected would not be allowed to access capital markets for "at least one year from the date of such rejection".
 
The period might be increased depending upon the materiality of the omissions and commissions, SEBI said.
 
"In cases where the board rejects a draft offer document or where an issuer or a merchant banker to an issue chooses to withdraw the draft offer document, there shall be no refund of filing fees with the board," SEBI said.
 
According to the regulator, mere triggering of any criteria in the general order would not be considered as an automatic case for rejection and a final view would be taken after due consideration on a case-to-case basis.
 

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RBI sets up panel to speed up financial inclusion

The 11-member panel is expected to explore issues like developing viable and sustainable banking services delivery models and developing products and processes for rural as well as urban consumers outside the banking network

 
Mumbai: Amid slow progress in bringing the entire population under banking network, the Reserve Bank of India (RBI) has announced setting up of a high level committee to 'spearhead' efforts to ensure accessible financial services in the country, reports PTI.
 
The Financial Inclusion Advisory Committee (FIAC) under RBI Deputy Governor KC Chakrabarty is expected to suggest appropriate regulatory framework to ensure that financial inclusion and financial stability move in tandem, the RBI said in a statement.
 
Stating there has been significant, 'albeit slow', progress towards greater financial Inclusion, the RBI said ensuring accessible and affordable financial services in all the six lakh villages is a 'herculean task' and given the enormity of the task, "a lot of ground still needs to be covered".
 
"This calls for a partnership of all the stakeholders," it said. The stakeholders include, RBI, SEBI, IRDA, PFRDA, NABARD, governments, civil society and NGOs, among others, the central bank said.
 
As per 2011 census, about 58.7% households had reported availing of banking facilities. Out of the 24.69 crore households, 14.48 crore reported availing banking services. Nearly 10 crore households were not availing the services.
 
The 11-member panel is expected to explore issues such as developing viable and sustainable banking services delivery models and developing products and processes for rural as well as urban consumers outside the banking network, the RBI said.
 
The regulators and the central government are already part of the Technical Group on Financial Inclusion and Financial Literacy and Sub-committee of Financial Stability and Development Council.
 
The apex bank said a need was felt to engage the members from the civil society, Non-Governmental Organisations and others for a sound and purposeful collaboration.
 
The Committee, if necessary, would call other market players like technology vendors and corporate business correspondents as special invitees to the meetings.
 
"Since the financial inclusion model selected in India is primarily bank-led, the Financial Inclusion Advisory Committee may also invite the Chairperson/Managing Directors of banks to each of its meetings to gather the perspective of the banks," it added.
 
The members include, YH Malegam, Dipankar Gupta, Ela Ramesh Bhatt and DK Mittal (Banking Secretary) besides Members of the Central Board of Directors of RBI.
 
Nachiket Mor, MS Sriram, RS Sharma, B Sambamurthy, Rama Vedashree, PDK Rao and KR Kamath, are the other members.
 

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Enfield's new Thunderbird 500 Bullet priced at Rs1.83 lakh

Enfield's new bulelts, the Thunderbird 500 is priced at Rs1.83 lakh and Thunderbird 350 is priced at Rs1.43, on road in Mumbai

 
Mumbai: Royal Enfield, the Chennai-based makers of the iconic Bullet, has launched a new Thunderbird model in two variants -- 500 cc and 350 cc. The new Thunderbird, targeted at the highway cruising buffs, are priced at Rs1.83 lakh (on road Mumbai for the 500 cc) and Rs1.43 lakh (350 cc), reports PTI.
 
"We hope to cross the 1-lakh magical sales figure this fiscal on the back of robust sales so far. We have been clipping at around 50% in sales, and have still six to eight months of waiting," managing director and chief executive of Eicher Motors (which owns the Royal Enfield Company) Siddhartha Lal told reporters.
 
These sales growth numbers come at a time when the auto market has been de-growing in the past few months.
 
In September, the motorcycle sales in the country plunged a whopping 19%, while car sales dipped 5.4%.
 
Last year, Enfield had notched up a full 50% growth in sales to over 75,000 units, Lal said.
 
Lal also announced the company's entry into the biking accessories market with a slew of apparel and biking gadgets, including leather and nylon jackets, helmets, gloves, etc.
 
"We have decided to close the plans about launching a diesel variant," he said.
 
"I hope with the commissioning of our second plant by the first quarter of 2013, we will be able to trim the long waiting period, which is now six to eight months. Currently, almost 90% of our sales come form domestic market and still we are unable to offer the bikes on demand.
 
"Definitely, we want to be global brand. But our first priority is to meet the domestic demand and the exports will be focused from FY15 onwards," Lal said.
 
Royal Enfield chief executive Venki Padmanabhan said the company sells around 1,000 units of the existing 350 cc Thunderbirds.
 
Later, senior vice-president for sales and marketing Shaji Koshy said the company has already got 100 bookings within hours of launch, 50 from Mumbai alone.
 
The first Thunderbird was launched in 2002 and sells around 1,000 units a month of the 350-cc model, Lal said.
 

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