SEBI Relaxes Preferential Issue Pricing Methodology To Aid Fundraising  
U.K. Sinha, chairman of the Securities and Exchange Board of India (SEBI), center, speaks during a news conference in Mumbai, India, on Monday, Feb. 27, 2017. Indian commodity exchanges may have to wait longer to introduce options contracts after the regulator said that some rules may need to be tweaked before allowing investors to trade in the segment.

SEBI Relaxes Preferential Issue Pricing Methodology To Aid Fundraising  

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The Securities and Exchange Board of India has put in place a revised framework that provides for a relaxed pricing methodology for preferential issue of shares to make fundraising easier for corporates amid the coronavirus pandemic.

The market regulator has also allowed the purchase of shares through the stock exchange settlement process via bulk or block deals during an open offer subject to certain conditions.

The new frameworks come after the SEBI approved the proposals in this regard last week.

Experts said the changes in pricing norms for preferential issues would help promoters and investors to infuse funds into companies that are facing many difficulties due to the coronavirus.

SEBI provided an additional option for pricing methodology in preferential issues. The notification issued on Wednesday also made a compulsory three-year lock-in period for shares where the new option is exercised.

The option in pricing would be available for the preferential issues made between July 1 and December 31.

In the case of frequently traded shares, the price of the equity shares to be allotted according to the preferential issue should not be less than higher of either of two levels.

  • The average of the weekly high, and low of the volume weighted average price of the related shares during the 12 weeks preceding the relevant date
  • Or such average of the weekly high and low of VWAP of shares during the two weeks preceding the relevant date.

"All allotments arising out of the same shareholder's approval shall follow the same pricing method," SEBI said.

The decision has been taken after the regulator received numerous representations from various stakeholders for temporarily liberalising regulations relating to raising of capital from securities market.

In a separate notification, SEBI has permitted purchase of shares through bulk or block deals during an open offer.

In case of indirect acquisitions, where public announcement of an open offer has been made, the entire consideration payable under the open offer must be deposited two working days before the date of detailed public statement, the regulator said.

In case, there is a delay in making open offer due to the acquirer's act, a simple interest of 10% would be paid to all the shareholders, who have tendered the shares in the open offer.

SEBI has amended the Issue of Capital and Disclosure Requirements and Substantial Acquisition of Shares and Takeovers to implement the new framework.

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