Easing fast-track route norm to benefit 180 companies

Sebi set Rs 1,000-cr free-float m-cap as new threshold for issuers intending to come out with a follow-on public offering under fast-track route

The Securities and Exchange Board of India (Sebi)’s decision to ease the fast-track route eligibility regulations will benefit as many as 180 companies.

The market regulator, at its board meeting on Tuesday, set Rs 1,000 crore free-float market capitalisation (m-cap) as the new threshold for issuers intending to come out with a follow-on public offering (FPO) under the fast-track route, against Rs 3,000 crore earlier.

The free-float m-cap is the value of non-promoter shareholding of a company. Typically, as these shares are owned by public shareholders and institutional investors, they are readily available for trading.

Under the fast-track route an issuer has to file an offer document with Sebi but doesn’t have to wait for its observations or approval to hit the market. Sebi says the relaxation is to help more listed companies raise capital with ease. Welcoming the move, investment bankers said it would boost the appeal of FPOs and rights issues.



V Jayasankar, head of equity capital markets at Kotak Investment Banking, says bringing more companies under the fast-track fold will boost the attractiveness of FPOs and rights issues, compared to some fund raising instruments like qualified institutional placements (QIPs). As Sebi doesn’t scrutinise the offer document, there will be no waiting period for companies eligible under this route, he said.

Sanjay Sharma, managing director, equity capital markets at Deutsche Equities, says the fast-track route helps bring down the pre-issue timeline. “Just as reducing the IPO timeline will help investors, bring down pre-issue timeline will help issuers and give a boost to fund-raising,” he added.

Under rights issue, a listed company raises capital by issuing equity shares to existing shareholders, while a FPO is similar to an IPO.

Jet Airways, IndiaBulls Real Estate, Godrej Industries, Ceat, IDBI Bank and Indian Overseas Bank are some of the companies which will now be able to raise capital through an FPO or rights issue under the fast-track route.

This is the third time in five years that Sebi has brought down the fast-track route eligibility criteria for FPOs and rights issues. In 2012, Sebi  reduced the free-float m-cap threshold from Rs 5,000 crore to Rs 3,000 crore for companies to qualify under this route. Earlier, in 2009, the average free-float m-cap requirement was halved to Rs 5,000 crore from Rs 10,000 crore. The free-float m-cap for the rights issue has now been brought down substantially to  only Rs 250 crore.

Sebi, however, has introduced some caveats for qualification under the fast track route. The regulator has said that the annual delivery-based trading turnover for a company will have to be 10 per cent of its total paid up capital. Further, the company shouldn’t have been suspended from trading in the past three months and there shouldn’t be any pending proceedings initiated by Sebi against the promoters or full time directors of the company.