Sebi mulls removing 1% security deposit for IPOs and rights issue

The market regulator on Friday proposed to remove the requirement of a 1 per cent security deposit for public issues, such as rights and initial public offerings (IPOs).

At present, an issuer has to deposit one per cent of the issue size with the designated stock exchange. This security deposit is refundable or is forfeited, depending on the cases specified by the Securities and Exchange Board of India (Sebi).

Such a deposit was made to ensure that investor complaints regarding the refund of application money or allotment are resolved.

“Considering various reforms and the present framework for public/rights issue such as application through ASBA (Application Supported by Blocked Amount), UPI mode of payment, mandatory allotment in dematerialised etc., the concerns relating to post-issue investor complaints regarding the refund of application money, non-dispatch of physical certificates do not arise,” said Sebi.

The regulator added that the number of complaints per IPO have reduced after the implementation of T+3 (Trade day plus three days) listing cycle.

The suggestions have come from an expert committee formed to look at ease of business. The committee had earlier recommended more flexibility for companies to alter the issue size after filing an offer document, more avenues to maintain the mandatory 20 per cent minimum promoters’ contribution post-listing, amongst a slew of other measures to relax IPO-related norms.

As per sources, the suggestions may be taken up by the regulator in the next board meeting scheduled later this month.

Regulator mulls introducing share pledges by AIF
 

The Securities and Exchange Board of India (Sebi) on Friday proposed flexibility for certain Alternative Investment Funds (AIFs) to pledge equity invest­ments in the infrastructure sector to facilitate debt raising by such companies.
 

“Category I and II AIFs may create encumbrance on equity of an investee company only for the purpose of borrowing by the said investee company, if the investee company is in the bus­i­ness of development, ope­ra­tion or management of proj­ects in the infrastructure sub-sec­tors,” said Sebi in a consu­ltation paper floated on Friday. However, AIFs will not be able to do the same on equity of foreign investee firms. Fur­ther, AIFs will not be allowed to ext­end any form of guar­antee for investee companies. 

Several industry participants had submitted representations to the regulator to grant relaxation for the infrastructure segment.