Sebi has extended its period of approval for initial public offerings (IPOs) and rights issues by six months
These relaxations will be applicable for issues opening before 31 December
India’s markets regulator on Tuesday said it has granted a one-time relaxation in its primary market fund-raising norms to make it easier for companies to raise capital amid the covid-19 pandemic.
The Securities and Exchange Board of India (Sebi) has extended its period of approval for initial public offerings (IPOs) and rights issues by six months. This will be applicable to companies where Sebi’s approvals have expired or are due to expire between 1 March and 30 September.
The relaxation is based on representations made by various industry bodies and is expected to help businesses that have been severely bruised by the pandemic.
The previous regulations made it mandatory for companies to go public or complete the rights issue within 12 months of the date of issuance of observations by Sebi.
The regulator also relaxed norms on changing the fresh issue component within the IPO, with businesses now allowed to tweak up to 50% of the estimated issue size without having to re-file the draft offer prospectus.
Previously, companies were required to re-file the draft offer prospectus if they increased or decreased the estimated fresh issue size by more than 20%.
These relaxations will be applicable for issues opening before 31 December.
In a separate circular on Tuesday, Sebi notified further changes to rights issues guidelines in order to make such share sales easier for listed companies.
Based on the new norms, a company that has been listed on the stock exchanges for 18 months can raise funds via a rights issue, as opposed to the earlier norms that allowed firms that were listed for at least three years to undertake a rights offer.
Further, the eligibility criteria of average market capitalization of public shareholding of the issuer has been relaxed to ₹100 crore from the earlier ₹250 crore.
The minimum subscription required for a rights issue to be considered successful has also been relaxed to 75% from the previous 90%, if out of the total funds raised at least 75% of the issue size is utilized for the objects of the issue other than general corporate purposes.
“There are many companies that have got Sebi approvals for IPOs but are unable to list within the permitted time-frame due to the existing market conditions. The new regulation will provide a big relief to these companies that would have otherwise had to re-file the draft documents, along with the processing fees, just because their Sebi approvals expired," said Subhrajit Roy, executive director and head, equity capital market origination at Kotak Investment Banking.
“The other change on allowing companies to tweak their fresh component of the public issue would also help them increase or decrease their issue size based on the current market conditions. In a volatile market like this one, valuations are bound to get revised, and once the market is opportune for public listings, this will help companies re-evaluate their issue size and pricing," he added.