Moneycontrol
Jan 11, 2017 04:03 PM IST IST | Source: Moneycontrol.com

SEBI may tweak preferential allotment norms to accommodate banks

At present, companies cannot make a preferential issue of shares to entities who have sold shares of the issuer company in the preceding six months

Tarun Sharma
Moneycontrol

The Securities and Exchange Board of India may tweak the rules for preferential issue of shares so that banks can apply for such an issue even if they have sold equity shares of the company in the last six months.

The proposal will come up for discussion in the meeting of the Primary Market Advisory Committee on January 16.

At present, companies cannot make a preferential issue of shares to entities who have sold shares of the issuer company in the preceding six months.

However, mutual funds and insurance companies are exempt from this rule.
Banks have made a pitch to SEBI that they have had to sell shares of companies while trying to recover loans. This then makes them ineligible for any preferential issue of shares by the company concerned six months later even if they are getting it at an attractive price.

SEBI has sought the views of the PMAC on whether a similar relaxation, as enjoyed by mutual Funds and insurers should be extended to banks and financial institutions as well.

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