SEBI proposes ’e-IPOs’, fast tracking FPOs/rights issues for small-cap firms

Capital markets regulator Securities and Exchange Board of India (SEBI) has proposed draft norms for initial public offers (IPOs) in electronic form to boost retail participation, and a 'fast-track' route for already listing public listed firm to raise funds via follow-on public offerings (FPOs) and rights issues.

The proposed development comes as a part of efforts to boost fundraising from the markets via simplifying the process of IPOs, lowering their costs, helping companies reach more retail investors in small towns, and providing fast track route for FPOs and rights issues.

The proposed electronic-IPOs (e-IPOs) mechanism will enable investors to place bid for shares in the public offering online, eventually on mobile too, without signing any physical documents. The process will result in overall lower cost of public issues due to reduction in printing of application forms.

The capital market watchdog said this would also reduce the timeline for listing of shares to six days of the IPO, as against 12 days currently. Also, there is scope to cut it further to two-three days once the process gets stabilised.

Under the proposed norms for e-IPOs, investors can submit applications to a registrar and transfer agent (RTA), a registered stock broker, a self-certified syndicate bank (SCSB) or a depository participant (DP). Depositories can access the stock exchange platform and, in turn, provide the same to their DPs or RTAs, it said.

It will be applicable for retail and employee reservation categories. The regulator is also looking to put in place a framework for implementation in future for use of mobile applications for making bids in public issues, SEBI said.

On the other side, the proposed 'fast track' route will allow the companies having public shareholding market valuation of as low as Rs 250 crore against Rs 3,000 crore at present to float such an issue. Such issues can be pushed through faster as no draft offer document is required to be filed with SEBI. In such cases, SEBI does not issue any clarifications/observations and issuer can open the issue immediately after filing the Red Herring Prospectus (RHP).

However, SEBI has proposed that while extending the window to more companies it would mandate that promoters should participate in such issues fully. But it has said in cases where promoters need to relax their holding to meet minimum public holding norms, there can be a relaxation.

Also, shares should not have been suspended (except for corporate actions) from trading in the past three years, and annualised delivery based trading turnover has been proposed at 10 per cent of the total paid up capital.

SEBI said that these proposals may be used for debt issues as well.

The regulator has sought comments on the proposal till January 30, after which it would put in place final norms for e-IPO as also for fast-track issuances.

Here's the link to the full draft proposals.

(Edited by Joby Puthuparampil Johnson)

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