Market regulator planning to reduce rights issue timeline to 31 days

Market regulator Securities and Exchange Board of India (Sebi) is planning to halve the rights issue timeline — the duration between a company deciding to launch the rights issue and the listing of new shares. Currently, it takes a little less than two months for the rights issue process to complete. Sebi has proposed changes to the framework which will bring down the timeline to just 31 days.

“It can be observed from past transactions that once the rights issue price and terms are announced, the stock price or the company and the rights issue price begin to converge, leaving little incentive to shareholders to benefit from the rights issue price, which is typically at a discount to the trading price at the time of announcement. Also chances of macro events impacting stock performance of companies, from the time issue price is announced are high, given current rights issue timelines,” said Sebi in a discussion paper floated on Tuesday.

Currently, it takes 26 days from the notice of the board meeting to the opening of the rights issue. The regulator is proposing to drastically cut this time to just 9 days by cutting the time between board approval for the rights issue and setting of the record date.  Also, the issue open period is currently fixed at a minimum of 10 days and maximum of 30 days. Following which the allotment and listing process takes about 12 days. Under the new framework, the issue period will remain 15 days, but the allotment and listing period will be brought down to 8 days.

Sebi said market participants can send their comments on the new proposals by June 21.

The move to bring down the rights issue timeline comes just after the conclusion of two issues. 

This month telecom majors Vodafone Idea and Bharti Airtel mopped up Rs 25,000 crore each through rights issue.

Sebi is currently in the midst of reducing the timeline for initial public offerings (IPO) from seven days to just three days.