Sebi eases rights issue compliance, cuts down completion time to 23 days from 317 days

This mechanism would be even faster than the preferential allotment route that takes 40 working days.

The market regulator has eased norms for faster rights issue, which is meant to be more appealing than a current market favourite--preferential allotment route.

This new route can be completed in 23 days from the issuer's board meeting approving the rights issue, versus the present timeline of 317 days, and faster than the 40 working days needed for completion of preferential allotment.

In a statement released after meeting with its Board on September 30, the Securities and Exchange Board of India (Sebi) stated, "With a view to facilitate ease of doing business, to enable faster Rights Issue along with the flexibility of allotment to specific investors and giving an investment opportunity to existing shareholders, the Board has approved the following5.

1 Rights Issue to be completed in 23 working days from the date of Issuer’s Board Meeting approving Rights Issue, as against present average timelines of 317 days. This mechanism would be even faster than the preferential allotment route that takes 40 working days. In addition, it would give existing shareholders of the company an opportunity to participate even more, in the future potential growth of the company.

2.Discontinuation of the current requirement of filing Draft Letter of Offer with SEBI for issuance of its observation, instead it will be filed with Stock Exchanges for its in-principle approval, as the entity is already a listed entity. Stock Exchanges would confirm that the issuer is in compliance with LODR disclosure requirements.

3.Rationalization of content of Letter of Offer to contain only the relevant incremental information regarding rights issue viz. object of issue, price, record date, entitlement ratio etc

4.Dispensing with the mandatory requirement of appointment of a Merchant Banker by an Issuer and making it optional subject to completion of rights issue within the timeline of 23 working days. Assigning ancillary activities of Merchant Bankers in rights issue to the Issuer company, Registrar to issue and Market Infrastructure Institutions.

5.Stock Exchanges and Depositories to concurrently carry out activities of Registrar to the issue, namely, validation of applications and finalisation of basis of allotment. Further, Stock Exchanges and Depositories to develop a system for automated validation of the applications in a period of six months.

6.Permitting promoters to renounce their rights entitlements to any specific investor(s) and allowing the issuer to allot under-subscribed portion of rights issue to any specific investor(s), provided appropriate disclosures are made through advertisement in this regard.

7.Appointment of Monitoring Agency will be mandatory for all rights issue irrespective of the issue size, to monitor the use of proceeds of the issue

8.Rights Issues of issue size less than 50 crore rupees, have been brought under the purview of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018.