INDIA BUSINESS WORLD - August 1st - August 31st - 2008
RIGHTS ISSUES TO NOW GET CLEARED IN JUST 43 DAYS
INDIAN corporates looking to raise money will now be able to reach out to their shareholders faster, with capital market regulator Sebi reducing the time line for approving a rights issue from 109 days to 43 days.
Sebi has also revised pricing norms for qualified institutional placements (QIP) and preferential allotment to qualified institutional buyers (QIBs), a move that will facilitate capital-raising efforts. The floor price for QIPs will now be based on two weeks' average with the relevant date being the day on which the board decides to open the QIP. The floor price is currently based on the higher of the average of the weekly high and low of the share's closing price during the two weeks or six months preceding the relevant date.
"In volatile markets, it is not practical for issuers to have QIPs in the existing format," Sebi chief CB Bhave said while briefing the media after a meeting of the regulator's board.
"Though the 43-day duration (for rights issue) is not ideal for an issue to close, as per international standards, it would reduce the market risk faced by investors and issuers and also ensure faster turnaround of money for investors," Mr Bhave said.
Sebi, however, has not changed the relevant date for preferential allotment to QIBs as the resolution for this kind of issue is valid only for 15 days as against one year for QIPs.
The Sebi board did discuss the issue of participatory notes but no view was taken. "Based on the data available with us, the board did discuss P-notes, as decided earlier, but no decision has been taken," he said, adding that the issue would be reviewed at a later stage.
The other decisions approved at the meeting pertained to carrying out amendments to submission and publication of financial results besides procedural changes relating to scheme-wise annual reports for mutual funds. While reducing the duration for mutual funds to dispatch abridged annual reports, Sebi said these documents need to be dispatched to unitholders in four months, compared to six months earlier. Sebi has amended its disclosure and investor protection guidelines and the listing agreement to reduce the time line for rights issues.
Accordingly, the notice period for a board meeting and record date for a rights issue will be reduced to two days and seven days, respectively. Also, the issue period will be reduced to 15-30 days while the post-issue activity will be reduced to 15 days.
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