Market regulator Securities and Exchange Board of India (Sebi) on Tuesday made it mandatory to complete the rights issue within 23 working days from the date of its approval by the company’s board of directors. The move comes amid Sebi‘s objective to make rights issues more lucrative for the purpose of raising funds.
In a circular issued today, it has directed stock exchanges and depositories to inform all the stakeholders about this while putting in place necessary systems and infrastructure for monitoring and implementation of the new norms.
Validation of application bids received for subscribing to the shares in rights issue and finalisation of basis of allotment will also be carried out by them along with the registrar to the issue.
They will also have to develop a system for automated validation of applications by the investors within a period of six months from the date of applicability of this circular.
The circular further specified that the rights issue will be kept open for subscription for a minimum period of seven days and for a maximum period of thirty days.
The provisions of this circular will come into force from April 7, 2025.If the issuer is making a rights issue of convertible debt instruments, where shareholder’s approval is required, then the notice for second board meeting for the purpose fixing record date, price, entitlement ratio etc. would be given on the date of receiving shareholders’ approval and the remaining timeline would be adjusted accordingly, the Sebi circular issued today said.It usually took approximately 50-60 days in completing the due diligence process and preparation of Draft Letter of Offer (DLoF)/Letter of Offer (LoF) by the MBs, which made the rights issue process lengthy.
In a consultation paper released in August 2024, Sebi had sought suggestions on reducing the timelines involved in the process. The issue was placed before the Primary Market Advisory Committee (PMAC) in its meeting held on July 22, 2024 for its consideration and recommendations.
The consultation paper had invited feedback on a host of other issues like reviewing the role of intermediaries involved in the Rights Issue Process, reducing the timelines involved in the process, enabling allotment to selective investors and laying down adequate checks and balances.
According to a Sebi data, in FY 2023-24, Rs 15,110 crore were raised via 67 rights issues. In FY23 and FY22, Rs 6,751 crore and Rs 26,327 crore, respectively were raised via 73 and 43 issues.
The companies were able to raise significantly higher amounts through QIPs and preferential allotment of shares. In FY24, companies garnered 68,972 via QIP route while raising Rs 45,155 crore through preferential allotments.
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