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Sebi modifications age-old minimal subscription requirement in rights points

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Mumbai: The Securities and Exchange Board of India (Sebi) has modified the age-old minimal subscription requirement in rights points, a transfer aimed toward making fundraising simpler for corporations.

At current, the rules required corporations doing a rights subject to make sure minimal 90% subscription.

“In most cases, promoters undertake to subscribe to additional rights in case there is an under-subscription. In few cases, bankers also underwrite the issue and there have been odd cases where the banker had to arrange subscription to meet the 90% requirement,” stated Pranjal Srivastava, an unbiased funding banker.

The regulator on Wednesday stated the necessary 90% minimal subscription wouldn’t be relevant to these issuers the place object of the problem includes financing aside from financing of capital expenditure for a undertaking, supplied that the promoters and promoter group of the issuer undertake to subscribe absolutely to their portion of rights entitlement.

“The current change is a good enabler by Sebi as it will give confidence to companies and promoters to launch rights issues in the current volatile market conditions without having to ensure that all shareholders subscribe to the rights,” Srivastava stated.

This yr, between May and August, 11 corporations together with Reliance Industries and Shriram Transport Finance Company have raised Rs 60,000 crore via rights points.

Sebi has additionally allowed truncated disclosures for rights points. It stated corporations can file monetary statements and periodic experiences for final yr as an alternative of the final three years as required earlier. That can also be relevant to instances the place three years have handed after change in administration following acquisition of management.

“Disclosure requirements have been rationalised to avoid duplication of information in letter of offer, especially the information which is already available in public domain and is disclosed by the companies in compliance with the disclosure requirements,” Sebi stated in a press release on its web site.

Sebi has additionally elevated the brink to Rs 50 crore from Rs 10 crore for potential issuers to file with Sebi the rights subject draft letter of supply for the regulator’s observations.

“The issuer shall be eligible to make fast-track rights issue in case of pending show- cause notices in respect to adjudication, prosecution proceedings and audit qualification, provided that necessary disclosures along with potential adverse impact on the issuer are made in the letter of offer,” Sebi stated.

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