The Securities and Exchange Board of India (Sebi) on Tuesday proposed several measures to streamline disclosure requirements and shorten processing times for rights issues, aiming to make it a more attractive fundraising route.
In a consultation paper, Sebi suggested enabling selective allotment to investors in rights issues, abolishing the requirement for issuers to appoint a merchant banker, and mandating a monitoring agency to oversee the use of proceeds from all types of rights issues.
Currently, only issuers offering securities worth less than Rs 50 crore are exempt from appointing a monitoring agency.
The regulator also proposed that issuers whose trading is suspended at the time of a rights issue should be barred from proceeding with it, introducing eligibility criteria that currently do not exist.
These proposals are part of Sebi's efforts to make rights issues a preferred mode of raising capital, noting that the amount raised through this route in FY24 was significantly lower than through Qualified Institutional Placements (QIPs) and preferential allotments.
Additionally, the number of rights issues was much less than preferential allotments during the period. Public comments on the proposals are invited until 10 September.
Sebi's consultation paper also recommends rationalising the content of the 'Letter of Offer' for rights issues, requiring only relevant information such as the issue’s objective, price, record date, and entitlement ratio.
Sebi noted that investors need only additional, issue-specific information, given that most other details are already publicly available.
Sebi has further proposed reducing the current indicative timeline for rights issues to 20 working days from the date of the board meeting approving the issue until its closure.
Currently, non-fast track rights issues can take up to 317 days to complete, while fast-track issues take around 126 days.
The regulator also suggested transferring the responsibilities of the merchant banker to the Registrar to Issue or stock exchanges, and proposed that stock exchanges and depositories concurrently handle the validation of applications and finalisation of allotments.
Additionally, Sebi has proposed relaxing restrictions on renunciation by promoters, allowing them to renounce their rights in favour of selective investors, subject to upfront disclosure of such details through advertisements and stock exchange notifications.
The regulator also recommended that issuers disclose specific information in the simplified 'Letter of Offer,' including details of non-compliance with listing agreements or LODR rules over the past three years, the percentage of complaints redressed by the issuer, and any outstanding show-cause notices.
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