SEBI relaxed and welcomed short track rights issues generating capital on the stock market until 31 March 2021.
Steps to further promote the collection of funds from capital markets in the light of the COVID-19 disease outbreak
In the face of the threats to the Indian economy emerging from the Covid-19 pandemic and with a view to enhancing access to corporate finance through capital markets, SEBI has agreed to offer some temporary relief from regulatory obligations related to rights / public concerns to listed entities.
Fast Track Rights issuances
SEBI has relaxed the following requirements in order to broaden the scope of mentioned organizations for the benefit of fast track rights issues:
1) The qualification requirement for the total market capitalization of the public shareholding of INR 250 crores has been lowered to INR 100 crores.
(2) The requirement relating to the period of listing of the shares of the issuer for at least three years has been reduced to a listing of only eighteen months.
3) The provision relating to no audit credentials in the audited reports of the issuer has been replaced by the obligation to report the effect of the audit credentials on the financial statements of the issuer.
4) Some other requirements of registration with respect to the time of compliance with the terms of the listing regulations, the pending proceedings were taken by SEBI against the issuer/promoter/director, and the enforcement of the violation of the securities laws have now been relaxed.
For order to have more consistency for collecting funds, the threshold for minimum subscription thresholds for rights issues has been reduced from the current 90 percent to 75 percent of the bid value, subject to some limitations.
The threshold for failing to apply a request for a letter of a bid to SEBI
In order to minimize the time involved in raising funds and to simplify compliance requirements, identified organizations collecting funds up to INR 25 crores in rights issues would not be required to request a draft bid paper.
The official requirement for this is INR 10 crores. Such relaxations shall extend to the correct problems which are accessed on or before 31 March 2021. It can be recalled that SEBI revised the ICDR Regulations last year in order to substantially shorten the timeline for the resolution of the T+ 55-day rights question to T+ 31 days and to implement the dematerialization and exchange of rights entitlements. Such steps will make the system for rights more functional and successful.
Flexibility on Issue size
An issuer whose offer document is awaiting receipt of SEBI observations may increase or decrease the size of the fresh issue by up to 50 per cent of the expected issue size (instead of the existing limit of 20 per cent) without allowing the Board to send a fresh draft offer document. Relaxation shall extend to all tender contracts awaiting receipt of SEBI findings by 31 December 2020.
Validity of the findings of SEBI
Having respect to the current economic scenario and on the basis of demands from different industrial bodies, It has been agreed that SEBI ‘s observations on all public issues / rights issues will be extended by six months from the date of expiry for issuers whose observations have expired / expired between 1 March 2020 and 30 September 2020.
To sum up, these steps are aimed at widening the number of listed organisations that are entitled to collect funds by fast track privileges, minimizing the time required and ensuring more flexibility in raising funds rather than relaxing regulatory conditions.
Circulars released by SEBI in respect of the measure referred to above are accessible on the SEBI website at http:/www.sebi.gov.in under the category-‘Legal-Circulars’. Mumbai 21 April 2020