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SEBI’s discussion paper on Revisiting the capital raising process

Securities market, including the market for public offerings, is dynamic and need to keep pace with the evolving environment. In order to keep pace with the changing economic environment and to address concerns of various market participants especially the issuers and the investing community, the regulations governing the primary market have been amended from time to time. In a discussion paper on “Revisiting the capital raising process” issued by Securities and Exchange Board of India (SEBI) highlights that existing listed issuers have preferred private placement including Qualified Institutional Placement (QIP) route vis-à-vis a subsequent offerings  by way of Further Public Offer (FPO) / Rights Issue. Further, participants in various forums have indicated that issuers have inclination towards private placement, because  of shorter time frame and lower costs associated with such route. Therefore, SEBI has been examining how to further facilitate capital raising by existing listed companies through FPO/Rights issue so as to provide retail investors the opportunity to participate in subsequent offerings and enable issuers to raise capital in the shortest possible time span.

In view of above, SEBI has proposed on the following two areas:

      Proposal on use of Secondary Market infrastructure for making applications in Public Issue (“e-IPO”)-- Investor will be able to submit his application to / place order with any SEBI  registered Stock Broker, Depository Participant (DP) or Registrar and Transfer  Agent (RTA) and Self Certified Syndicate Bank (SCSB). Depositories can take access to the Stock Exchange platform and in turn provide the same to their DPs /  RTAs. Investor will continue to have the option of  submitting Application Supported by Blocked Amount ("ASBA") application to SCSB or stock broker. Investors can also fill the application form online and submit it on the web portal of trading member, DP/ RTA or SCSB (in case of ASBA), if provided by the  intermediary. Under this case, the investor will not be required to physically sign any paper as even the Companies Act, 2013 recognizes the electronic form of a  document. This will help eliminate printing application form and thereby reduce the overall cost of public issuance.

      Proposal on Fast Track Issuances (FPO and Rights Issue)—In the discussion paper it is proposed that the fast track route may be extended to companies having an average market capitalisation of public shareholding between Rs. 250 crores to Rs. 3,000 crores, subject to fulfilment of certain additional conditions. In addition to above, for facilitating divestment of Central Public Sector Enterprises (CPSEs), it is recommended that the fast track issue route shall be available to them without the requirement of a minimum average market capitalisation of public shareholding subject to CPSEs complying with all the other existing conditions for Fast Track route.