The Securities and Exchange Board of India (Sebi) on Tuesday called for various measures to promote rights issues as a mode of fund raising. The capital market regulator has proposed amendments to measures such as filing of draft documents and appointing merchant bankers, which will help make the process faster and more efficient.
According to a report by Financial Express, SEBI has issued a consultation paper inviting public comments on the matter. As part of the suggestions, the regulator called for discontinuing multiple types of rights issues and introducing simpler offer papers with fewer disclosures such as issue price, record date, objective and eligibility ratio.
It is noteworthy that the company invites existing shareholders to acquire additional stake in the company through shares in the rights issue. To make this process more user-friendly and popular, the regulator suggested these measures and sought comments from the general public on the matter.
With regard to intermediaries such as merchant bankers and registrars, Sebi recommended allowing firms to go ahead with rights issues without appointing such intermediaries, and instead placing this responsibility on the issuer or stock exchanges.
“It can be inferred from this that investing in a company through a rights issue is more or less similar to buying in the secondary market. Therefore, in case of rights issue, there does not appear to be any need to collate information already available in the public domain, except certain issue-related information,” Sebi said through the paper.
The regulatory body further suggested that the timeline for the process from the date of board approval to the closure of the issue should be halved to T+20. It said that the timeline from the date of closure of the issue to trading should be reduced to T+3.
SEBI also proposed that promoters and promoter groups should be allowed to waive their rights in a rights issue and select investors with advance disclosure should be allowed to participate.
