Rights issue to get quicker

The Securities and Exchange Board of India (Sebi) today changed the Disclosure and Investor Protection (DIP) guidelines to quicken the process of right issues. The regulator has also tinkered with the eligibility provisions for Qualified Institutions Placement (QIP) and Qualified Institutional Buyers (QIB).

Sebi has disallowed sub-accounts falling in categories of "foreign corporate" and "foreign individual" in the definition of QIBs. Now onwards, these sub-accounts will not be allowed to invest in primary market through Foreign Institutional Investors (FIIs).

"The regulator wants to control the flow of money in these IPOs. By doing this, Sebi will ensure that Indian corporate money is not be routed to IPOs", said an investment banker.

Further, the eligibility criteria for making a QIP has been made simpler and flexible by taking into account the listing history of companies with which a merger or amalgamation has been made.

Earlier, a company which has been listed only during a preceding year before merger/amalgamation with another company that has been listed for more than a year was not able to use the QIP route for raising funds.

The pricing norms for QIP has been modified by bringing issue price of securities, closer to the market price. This has been effected through change in the floor price formula. The same pricing norms will be applicable for preferential allotment to QIBs as well, provided the number of QIB allottees in a preferential issue does not exceed five.

The shares allotted on exercise of preferential warrants will be subjected to full lock-in period of one year or three years, as the case may be from the date of allotment of such shares.

Sebi has allowed shares, which have been acquired in a restructuring exercise to participate in offer for sale. It has increased the issue size limit of draft offer documents, which are filed with Sebi's regional office to Rs 50 crore.