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Sebi puts in place revised framework for preferential issue pricing methodology

Market regulator Sebi has put in place a revised framework that provides for a relaxed pricing methodology for preferential issuance of shares, in a bid to make fund raising easier for corporates amid the coronavirus pandemic.

Besides, the regulator has allowed acquisition of shares through stock exchange settlement process by way of bulk or block deals during an open offer subject to certain conditions.

The new frameworks come after the Sebi board approved the proposals in this regard last week.

Experts believe the changes in the pricing guidelines for preferential issues would help promoters and investors to infuse funds into companies that are facing various challenges due to the pandemic.

In a notification issued on Wednesday, Sebi has provided an additional option for pricing methodology with respect to preferential issues. In cases where the new option is exercised, there would be the requirement of three-year lock-in period for such shares.

The option in pricing would be available for the preferential issues made between July 1 and December 31.

Under this option, in case of frequently traded shares, the price of the equity shares to be allotted pursuant to the preferential issue should not be less than higher of either of two levels.

One is the average of the weekly high and low of the Volume Weighted Average Price (VWAP) of the related shares during the 12 weeks preceding the relevant date or such average of the weekly high and low of VWAP of shares during the two weeks preceding the relevant date.

“All allotments arising out of the same shareholders approval shall follow the same pricing method,” Sebi noted.

The decision has been taken after the regulator received numerous representations from various stakeholders for temporarily liberalising regulations relating to raising of capital from securities market.

In a separate notification, the Securities and Exchange Board of India (Sebi) has permitted purchase of shares through bulk or block deals during an open offer.

In case of indirect acquisitions where public announcement of an open offer has been made, the entire consideration payable under the open offer must be deposited two working days before the date of detailed public statement, the regulator said.

In case, there is a delay in making open offer due to the acquirer”s act, a simple interest of 10 per cent would be paid to all the shareholders, who have tendered the shares in the open offer.

To give effect to these frameworks, Sebi has amended ICDR (Issue of Capital and Disclosure Requirements) and SAST (Substantial Acquisition of Shares and Takeovers) Regulations.

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