Markets regulator Sebi on Tuesday reduced the processing time for a rights issue of equity shares to 23 days in a bid to make it a preferred route of fundraising. Separately, the regulator has provided flexibility of allotment to specific investors in the rights issue and discontinued the current requirement of filing draft offer with it for issuance of its observation, instead it will be filed with stock exchanges for its in-principle approval, as the entity is already a listed entity.
The moves would facilitate ease of doing business and enable faster rights issues.
Under the framework, rights issues will be completed within 23 working days from the date of board of directors of the issuer approving the issue, Sebi said in a circular. This was against the present average timeline of 317 days.
This mechanism would be even faster than the preferential allotment route that takes 40 working days.
In addition, the move would give existing shareholders of the company an opportunity to participate even more, in the future potential growth of the company.
Sebi said that rights issues will be kept open for subscription for a minimum period of seven days and for a maximum period of 30 days.
In a separate notification, Sebi said, “The issuer shall file the draft letter of offer with the stock exchange(s)”.
The exchanges and depositories have been directed to develop a system for automated validation of the applications in a period of six months.
Also, Sebi has rationalized the content of Letter of Offer to contain only the relevant incremental information regarding rights issue — object of issue, price, record date and entitlement ratio among others It has abolished the mandatory requirement of appointment of a merchant banker by an issuer and making it optional subject to completion of rights issue within the timeline of 23 working days.
Sebi has mandated the appointment of a ‘monitoring agency’ to supervise the use of proceeds from all types of rights issues of equity shares.
Currently, an issuer offering securities worth less than Rs 50 crore through a rights issue is not required to rope in a monitoring agency.
With regards to specific investors, Sebi said the application by such investors be made on the first day of issue opening before 11 A.M. and the issuer shall disclose to the stock exchange(s) whether such specific investor(s) have made the application or not, for dissemination on the first day of issue opening by 11:30 A.M.>
