SEBI Proposes New Framework To Streamline Rights Issues
Key proposals include discontinuation of companies requiring to file a Draft Letter of Offer with SEBI for its observations
In a move aimed at making rights issues a more attractive and efficient mode of fundraising, the Securities and Exchange Board of India on Tuesday issued several proposed changes to the current regulatory framework.
One of the key proposals is to discontinue the requirement for companies to file a draft letter of offer with SEBI for its observations.
Instead, SEBI suggests that only essential information related to the rights issue—such as the purpose of the issue, pricing, record date, and entitlement ratio—needs to be disclosed.
This shift is expected to simplify the process and reduce the time taken for approvals.
Currently, the process of conducting due diligence and preparing detailed offer documents by merchant bankers can take 50–60 days.
The absence of specific timelines for completing these procedures often leads to delays in the overall fundraising process.
SEBI's proposed changes aim to expedite the process by rationalising the content of offer documents and eliminating certain requirements.
For rights issues with an issue size of less than Rs 50 crore, the current regulations do not mandate the appointment of a merchant banker. SEBI now proposes to extend this exemption further by allowing issuers to dispense with the requirement of appointing a merchant banker altogether.
The responsibilities traditionally handled by merchant bankers would be reassigned to the issuer, registrar of the issue, and stock exchanges.
Under the new framework, several activities currently managed by merchant bankers, such as submitting due diligence certificates, drafting offer documents, selecting intermediaries, and marketing the issue, would be transferred to the issuer.
Additionally, the finalisation of the basis of allotment and follow-up with bankers would be managed by registrars and designated stock exchanges.
SEBI also proposes that the authority to operate the rights issue escrow account should be transferred to DSEs, while registrars would take on the responsibility for dispatching certificates, refunds, and unblocking application monies.
The regulator has also suggested that stock exchanges and depositories develop a system for real-time validation of applications.
This system is expected to be operational within six months of the implementation of these proposals, further streamlining the process and ensuring greater efficiency in rights issues.
The consultation paper is open for public feedback.
