Sebi asks firms to disclose details of warrants utilisation

In order to bring more transparency to capital markets, regulator the Securities and Exchange Board of India (Sebi) today said listed firms will have to disclose details regarding utilisation of funds raised through warrants.

"In order to enhance disclosure requirements, listed entities have been mandated to disclose utilisation of funds raised upon conversion/exercise of warrants issued along with public or rights issue of specified securities," the Sebi said in a circular.

It said the new rule, a part of its amendments to the equity listing agreement, will take effect immediately.

Experts said the amendment would bring more confidence and transparency in the instrument of warrants.

A warrant is the right, but not the obligation, to buy or sell a certain quantity of an underlying instrument at an agreed-upon price.

"The Sebi circular has directed that companies disclose details regarding the usage of funds raised through warrants. The regulator is trying to monitor the reason for which companies raise the warrants and ensure that they are used for proper reason.

"This will elevate the credibility of the instrument," SMC Global Securities strategist and head of research Jagannadham Thunuguntla said.

The regulator had in the last few days brought a number of changes in its listing norms.

Earlier this month, it notified the IPP guidelines that will allow companies to reduce promoter shareholding through private placement.

As per the new norms for Institutional Placement Programme (IPP) of shares, the companies would even be allowed to issue fresh equity to institutional investors to dilute stake of promoters.

It also permitted promoters of top 100 companies to quickly dilute their shares through a separate window on the BSE and the National Stock Exchange which has to be completed within a day.

Besides, yesterday Sebi modified norms for share buyback through the tender offer route under which companies will have to reserve 15% of the offer for small shareholders.