“The pricing guidelines previously required the issue price in a preferential allotment to be the average of the last two weeks or the last 26 weeks — whichever was higher. The elimination of the restriction would now require to take the weekly high or low, which, in turn, would enable companies to raise funds through this route, which otherwise was impossible owing to the current market volatility,” said Sonam Chandwani, managing partner, KS Legal.
After touching all-time highs in January, the benchmark indices fell as much as 40 per cent before rebounding. Currently, the Sensex is down 15 per cent on a year-to-date basis.
has accounted for a substantial correction in share-pricing levels that have occurred in the past few months against the backdrop of the pandemic. This has been a key industry ask for some time and hopefully, now, with its implementation, companies will be able to expeditiously raise funds from investors they so direly need,” said Vaibhav Kakkar, partner, L&L Partners.
Experts said the new pricing formula will benefit promoters who want to consolidate their stake. Also, it will help institutional investors coming in through the qualified institutional placement (QIP) route.
“This will equip companies with possibilities of various combinations, such as a combination of a QIP and promoter investment. However, a lock-in of three years may be seen too long for an investor not in control and not seeking to gain control through this investment,” said Manan Lahoty, partner, IndusLaw.
Yash Ashar, partner and head-capital markets, Cyril Amarchand Mangaldas, said the lock-in will help prevent “abuse by investors”.
Earlier this week, Sebi
had relaxed the pricing formula for preferential allotment for stressed companies. Experts said the latest relaxation, coupled with those provided last week, will help address India Inc’s fund-raising concerns.
Last week, Sebi
allowed promoters to acquire up to 10 per cent in a financial year through preferential issue of equity shares without triggering the open offer. It also relaxed the mandatory six-month cooling off period between two QIPs to just two weeks.
Experts also welcome Sebi’s move to levy 10 per cent interest in case of delays in the open offer.