Taking a major decision, market regulator Securities and Exchange Board of India (SEBI) on Thursday temporarily relaxed the pricing norms for preferential issuance to ease the capital raising process for listed companies amid Covid-19 pandemic. The SEBI board, held via video conferencing, decided to provide an additional option to the existing pricing methodology for preferential issuance. The move is aimed at enabling issuance of new shares at more recent stock prices.
The decision was taken after the market watchdog received several representations from various stakeholders to “temporarily” liberalise regulations, a SEBI media release said.
In case of frequently traded shares, the price of the equity shares to be allotted pursuant to the preferential issue shall be not less than higher of the average of the weekly high and low of the volume weighted average price of the related equity shares quoted on the recognised stock exchange during the twelve weeks preceding the relevant date, the release said.
“The price of the frequently traded equity shares to be allotted pursuant to the preferential issue shall also not be not less than higher of the “average of the weekly high and low of the volume weighted average prices of the related equity shares quoted on a recognised stock exchange during the two weeks preceding the relevant date,” it further said.
The specified securities allotted on preferential basis using the above pricing formula shall be locked-in for a period of three years.
“The SEBI Board has approved a change in pricing for a preferential allotment by providing an option to see the 12 week formula. This change should be incorporated into the SEBI ICDR Regulations shortly. The additional condition they have added is that those who participate under such revised formula will be locked in for a period of three years. Such change is primarily intended to benefit the promoters of the Company as otherwise they would have had to pay a much higher price,” Yash Ashar, Partner & Head – Capital Markets at Cyril Amarchand Mangaldas said.
“Investors who are not in the nature of FPIs may also benefit from this. Very interestingly and arguably fairly, SEBI has imposed this additional lock in on such subscribers under this formula. This, we believe, will balance short to medium term requirements for the companies and ensure that there is no abuse by investors. Thus, in addition to a rights issue to maintain shareholding, promoters also will have this additional option,” he further said.
The Board also approved amendments to the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (“Takeover Regulations”).
The Board also approved the amendments to SEBI (Prohibition of Insider Trading) Regulations, 2015. The amendments include maintaining a structured digital database containing nature of unpublished price sensitive information and the names of persons who have shared the information, among others.
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The Board approved some amendments to the Settlement Regulations including – Promoters to be included along with the Principal Officer for the purpose of calculation of the base amount in terms of Table X of Schedule II.