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SEBI relaxes norms on promoter funding via preferential allotment
Photo Credit: Reuters

The capital markets regulator has allowed promoters with 25% or more voting rights to raise their stake by an additional 10% via preferential allotment instead of 5% earlier, a move that won’t trigger an open offer.

This policy, valid till March 31, 2021, has been introduced keeping in mind the Covid-19 situation that has disrupted businesses, commerce, travel and trade worldwide.

Promoters will also have greater flexibility in pricing their preferential issues. 

The move is expected to help companies secure funds from their promoters in a more efficient and effective way.

“It is a welcome move. While preferential allotment approvals from shareholders typically take between 20 and 30 days, such relaxations will help companies quickly receive emergency capital infusion from promoters without the worry of breaching the 5% creeping acquisition limit,” said Abhimanyu Bhattacharya, partner, capital markets, law firm Khaitan & Co..

The Securities and Exchange Board of India (SEBI) has introduced a slew of measures to safeguard companies and capital market participants amid the pandemic.

Last week, it extended the period allowed to private equity and venture capital funds to meet their regulatory disclosure obligations. This was the second extension after that made on March 30.

In April, SEBI reduced filing fees for public offerings and certain public market offerings to help market participants to tide over challenges arising from the pandemic.

The same month, it had relaxed minimum subscription requirements in a public issue and allowed higher-than-stipulated revisions in issue size after receiving industry representations that assessed the impact of the pandemic on capital markets activity.

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