Partly-paid shares: 25% upfront payment must for foreigners

Sebi today cleared a proposal that makes it mandatory for Indian firms to collect at least 25 per cent as upfront payment from foreign investors, who are allotted partly-paid shares of the company.
Besides, the board of Sebi approved a proposal allowing re-issuance of existing debt securities by a corporate issuer within a specified time period rather than launching a new issue. The move will help in strengthening the corporate bond market and increasing liquidity.
In case of partly paid shares issued through public / rights Issue, a minimum 25 per cent of the issue price would necessarily be received upfront. The balance consideration would continue to be received within 12 months if the issue size is less than Rs 500 crore.

If the issue size exceeds Rs 500 crore and the issuer has appointed a monitoring agency, the period can be decided by the issuer as per the existing regulatory framework, Securities and Exchange Board of India (Sebi) said in a statement.
"In respect of warrants issued along with public or rights issue of specified securities, 25 of the consideration shall be received upfront by the issuer and tenure of such warrants shall be 18 months as against 12 months presently," it added.
The approval comes after Reserve Bank of India (RBI) in July allowed foreign investors to invest in partly-paid shares and warrants of Indian companies.

The board has approved the proposal in order to harmonize the norms on receipt of upfront payment and tenure of partly paid shares or warrants between the Sebi Issue of Capital Disclosure Regulations (ICDR) regulations and Foreign Exchange Management Act (FEMA).

Also, Sebi board has cleared amendments to regulations governing issue and listing of debt securities that will incorporate provisions for enabling 'consolidation and re-issuance of debt securities' and 'call and put options'.
It will allow re-issuance of existing debt securities by a corporate issuer within a specified time period rather than launching a new issue.
The move would help create large stocks in any given issue, thereby helping to create secondary market liquidity.

"By enabling consolidation and re-issuance of debt-securities, the illiquid and infrequently traded corporate bonds can be re-issued thereby leading to creation of a larger floating stock that can increase liquidity in the market," Sebi said.
"By enabling call and put options, the issuer and investors would have flexibility in redemption of debt securities," it added.