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SEBI Reduces Rights Issue Timeline; QIP Pricing Norms Relaxed

15 August, 2008

 

Indian market regulator Securities Exchange Board of India has announced several measures which would make fund raising easier for Indian businesses. One decision is to reduce the timelines for rights issues from 109 days currently to 43 days, which will make the entire capital raising via rights issue a faster excercise.

The other key decision is to align the pricing of shares for qualified institutional placement (QIP) in tandem with the market. SEBI board on Wednesday decided that the floor price may be based on the two weeks average from the “relevant date” for making a QIP or for making a preferential allotment to QIBs. Currently the price for QIP is fixed as higher of the average of the weekly high and low of the closing prices of the shares during the two weeks or six months preceding the relevant date, which has been making it an expensive thing for the investors.

In fact, many private equity investors were staying from making PIPE (private investment in public enterprises) because of the disparity between QIP price and the market cap of the company. So in the earlier case, the QIP price will be higher in a falling market, while will be lower in a rising market making QIP an univable thing for investors as well as the company. The latest step by SEBI to align QIP pricing norms to that of the market will help drive PE deals in public markets.

The other decisons include a modification to Clause 41 of the listing agreement, which has extended the deadline for companies for submitting consolidated financial results to investors to two months after end of each quarter instead of one month at present.

At present companies have an option either to submit audited or unaudited quarterly and year-to-date standalone financial results to the stock exchanges before the end of each quarter. SEBI had earlier said companies with subsidiaries have the option to submit consolidated results within the one month.

See SEBI press release.

 


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SEBI Reduces Rights Issue Timeline; QIP Pricing Norms Relaxed

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