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Sebi okays proposals for greater disclosure by companies; approves redemption and dividend payout reforms

“Issuers shall disclose details of pricing of shares based on past transactions and past fund raising from investors,” the capital markets regulator said

September 30, 2022 / 08:03 PM IST

Securities and Exchange Board of India (Sebi) on September 30 approved proposals that push for greater disclosure by companies tapping the capital market through initial public offer (IPO).

It also mandated that online bond platforms will be registered with it as brokers and SEBI will soon issue a circular to specify mechanics of operations of these online platforms.

The capital markets regulator bought mutual funds under the ambit of insider trading regulations, and eased norms for offer for sale participation

The market regulator has made it mandatory for the disclosure of key performance indicators (KPIs), along with price per share in the papers filed for the IPO.

“Issuers shall disclose details of pricing of shares based on past transactions and past fund raising from investor,” the capital markets regulator said in a release.

Sebi chairperson Madhabi Puri Buch said that this is a move to enable investors to access relevant information about companies that may follow differing financial metrics. For instance new age companies and start-ups focus on growth and revenue metrics that may differ from the regular ones.

"The thinking behind this is to give investors a better basis to make their decisions whether the price is appropriate or not. There should not be asymmetry in information. So, whatever is shared with the QIBs must be shared with retail investors," Sebi chairperson Madhabi Puri Buch said.

"For companies that are so called new tech companies and are loss making companies. we know that for them, the traditional financial parameters are not really meaningful and in terms of assessing valuation, those metrics may not be appropriate," she explained.

Redemption and dividend payout reforms

Sebi said it would facilitate faster payout of redemption and dividend to unitholders by AMCs from existing 10 and 15 working days to 3 days and 7 working days.

"The old regulations were drafted when cheques were issued. Today, the payments systems are so advanced and fantastic, so there is no need for a delay and such a long time limit for investors to get their money," the Sebi chairperson said.

Also Read | Sebi includes mutual fund units in Insider Trading regulations

OFS framework amended

The regulatory body has also given its nod to the proposed changes in the existing framework for Offer for Sale (OFS) through stock exchange mechanism. "It has been decided to do away with the requirement of minimum 10 percent shareholding for the non-promoter shareholders for offering shares through OFS mechanism," the release said.

Currently, non-promoter shareholders holding at least 10 percent of the share capital of eligible company and willing to offer shares of at least Rs 25 crore are eligible to offer their shares through OFS mechanism.

Among other reforms, Sebi ruled that the online bond platforms must mandatorily register as stockbrokers, and has approved the proposal to reduce the face value of listed privately placed debt securities.

The regulator has also amended norms related to Real Estate Investment Trusts (REIT) to allow reduction in minimum holding by the sponsors from 25 to 15 percent of the total outstanding units. "Minimum holding of sponsors is reduced now. This is a liberalisation," Buch said.

Pre-filing of offer document

SEBI said that companies have now the option to pre-file offer document for the purpose of initial public offer on the main  board of stock exchanges. this pre-filing will be confidential and not public and SEBI will make its observations on it.

The document will be available for investors for 21 days after the SEBI's observations which makes SEBI's notifications available to investors for a longer period.

Moneycontrol News
first published: Sep 30, 2022 06:38 pm