QIP, rights issue norms relaxed

Sebi sticks to P-note guidelines after review.

In a significant relaxations on Wednesday, the Securities and Exchange Board of India (Sebi) changed pricing rules for qualified institutional placements (QIP) in view of rising market volatility, and reduced the timeline of rights issues.

But the market regulator did not change, as widely expected, the guidelines for participatory notes (P-Notes), derivative instruments, through which many foreign investors trade on the Indian bourses.

Briefing reporters after a Sebi board meeting, Chairman CB Bhave said QIP issues could be priced on the basis of the average price of two weeks before the issue, against the earlier requirement of taking the higher of the average previous six months’ or 15 days’ price. Industry sources estimate that 35 to 40 QIP issues are stuck on pricing issues.

S Ramesh, chief operating officer at Kotak Investment Bank, said: “After these norms, QIP issues will be in line with contemporary market conditions. Before this, companies were finding it difficult to sell their issues as the floor price was higher than the prevailing market price owing to the recent market meltdown.”
 

MINI-REFORMS

* QIP issues can be priced on the basis of the average price of two weeks prior to the issue instead of six months’ or 15 days’ now

* No change in relevant date for preferential allotment

* Companies can submit standalone results within one month of the end of quarter. Consolidated results to be submitted within 2 months

* Annual report to be sent by MFs to unit holders within 4 months

* Time taken to complete rights issues reduced to 43 days from 109 days now

The ministry of finance is now considering a similar relaxation for pricing of American Depository Receipts (ADRs) and Global Depository Receipts (GDRs).

“Globally, the issue price is fixed on the basis of the price of the stocks on the day of issue. We are yet to reach that stage,” said Bhave.

Sebi has also decided to reduce the time taken to complete rights issues to 43 days against the current 109 days. “This, too, will be reviewed. Even 43 days is not the ideal time. We are looking to see if it is possible to change the process itself rather than just reducing the time,” Bhave said.

Sebi has decided to amend the Disclosures and Investor Protection (DIP) guidelines and the listing agreement to accommodate these changes.

On P-Note norms, introduced in October 2007, Bhave said, “We examined the P-Note data but we did not see anything out of the ordinary. So the guidelines stand unchanged.”

The regulator also clarified that portfolio managers do not have to segregate unlisted assets with regard to the norm on non-pooling of assets that the regulator had put out a couple of months ago. The regulator had received representations from the industry to this effect.

Among other decisions, Sebi also decided to amend Clause 41 of the listing agreement that now requires listed companies to submit only consolidated results (as opposed to standalone results) to the stock exchanges and extended the time limit from one month to two months.

The board also approved the proposal prescribing and standardising the format for abridged scheme-wise annual reports and a reduction in the dispatch time to mutual fund unit-holders from six to four months. The new time limit will be made applicable for the annual reports of 2008-09 and onwards.