SEBI Board Meeting: Rights Issue Process Streamlined, Timeline Reduces To 23 Working Days

Markets regulator Securities and exchange Board of India on Monday has reduced the timeline for completing rights issues to 23 working days, down from the current average of 317 days. This faster process will allow companies to raise funds more efficiently, giving shareholders greater opportunity to participate.

"The rights issue to be completed in 23 working days from the date of Issuer’s board meeting approving rights Issue, as against present average timelines of 317 days," SEBI said in a statement after the conclusion of its board meeting. The new timeline is faster than the 40 working days required for preferential allotments.

SEBI has also removed the requirement for companies to file a draft letter of offer with the regulator. Instead, issuers will now submit it to stock exchanges for in-principle approval. The exchanges will confirm that the company complies with the required listing and disclosure regulations.

Additionally, the appointment of a merchant banker will no longer be mandatory if the rights issue is completed within the 23-day period. Issuers, along with the registrar and market infrastructure institutions, will take on the ancillary responsibilities previously managed by merchant bankers, the markets watchdog said.

Promoters will now be permitted to renounce their rights entitlements to specific investors, with issuers allowed to allot under-subscribed portions to these investors, subject to appropriate disclosures. "Promoters to renounce their rights entitlements to any specific investor(s) and allowing the issuer to allot under-subscribed portion of rights issue to any specific investor(s), provided appropriate disclosures are made."

A monitoring agency will be required for all rights issues to oversee the use of proceeds, regardless of issue size, it said, adding that the rights issues under Rs 50 crore will now fall under the SEBI's regulations.

Further, SEBI has tasked the stock exchanges and depositories to develop a system for automated application validation within six months.