Market regulator Securities & Exchange Board of India (SEBI) has given temporary relaxation related with rights and public issues of listed entities due to challenges faced by Indian economy during the coronavirus (COVID-19) pandemic.
In a release, SEBI says, “These measures are aimed at expanding the universe of listed entities that are eligible for raising funds through fast track rights issuances, reducing the time involved and providing greater flexibility in fund raising apart from easing compliance requirements.”
Here are measures announced by SEBI…
A. Rights Issues
1. Fast-track Rights Issuances
Towards expanding the universe of listed entities for the purpose of fast-track rights issuances, SEBI has relaxed the following conditions:
- The eligibility requirement of average market-capitalisation of public shareholding of Rs250 crore has been reduced to Rs100 crore.
- The requirement related to period of listing of equity shares of the issuer for at least three years has been reduced to listing for 18 months only.
- The condition related to no audit qualifications on issuer’s audited accounts has been replaced with the requirement to disclose the impact of audit qualifications on issuer’s financials.
- Certain other eligibility conditions with respect to period of compliance with the provisions of the listing regulations, ongoing action initiated by SEBI against the issuer / promoters / directors and settlement of violation of securities laws have also been relaxed.
2. Minimum Subscription
- To provide greater flexibility in fund raising, the threshold for minimum subscription requirements for a rights issue has been reduced to 75% of the offer size from existing 90%, subject to certain conditions.
3. Threshold for Not Filing Draft Letter of Offer with SEBI
- To reduce the time involved in fund raising and ease compliance requirements, listed entities raising funds up to Rs25 crore in a rights issue will not be required to file draft offer document. The existing threshold in this regard is Rs10 crore.
SEBI says, that these relaxations are applicable to right issues that open on or before 31 March 2021. It may be recalled that last year SEBI had amended ICDR regulations to significantly reduce the timeline for the completion of the Rights Issue from T+55 days to T+31 days as well as introduced the dematerialisation and trading of rights entitlements. These measures would make the rights issue framework more effective and efficient.
B. 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% of the estimated issue size (instead of the present limit of 20%) without requiring to file fresh draft offer document with the Board. The relaxation shall be applicable for all offer documents pending receipt of SEBI observations up to 31 December 2020.
C. Validity of SEBI Observations
Considering the prevailing economic scenario and based on requests from various industry associations, it has been decided to extend the validity of SEBI observations on all public issues/ rights issues by six months from the date of expiry for issuers whose observation has expired/ shall expire between 1 March 2020 and 30 September 2020.