Promoters can now acquire up to 10% through preferential allotment
Sebi has also reduced the time gap between two qualified institutional placements to two weeks from six months
The market regulator, Securities and Exchange Board of India (Sebi), on Tuesday relaxed the pricing norms for preferential allotment that will make it easier for listed companies to raise funds at a time when businesses are under financial stress and need of urgent capital due to the covid-19 related economic slowdown.
A preferential issue is an issue of shares or convertible securities by listed or unlisted companies to a select group of investors to raise capital in lieu of shares offered. It is considered to be the fastest way of racing capital. Preferential share holders do not have a voting right in the company.
The gazette tweaked Sebi takeover code for year 2020-21 to allow promoters to acquire up to 10% through preferential allotment. Currently promoters can acquire only upto 5% of the preferential issue. This could lead to a chance for promoters to increase stake at low prices
In a separate gazette notifications the market regulator also reduced the time gap between two qualified institutional placements from six months to two weeks.
Presently, preferential shares are sold at the average of the previous 26 weeks’ share price Sebi in April had proposed to reduce it to two weeks for stressed companies.
Adhering to 26 weeks' average share price had become a near-impossibility now given the steep erosion in stock prices in the last couple of months.