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Easier fundraising rules for companies on Sebi board’s agenda

Easier fundraising rules for companies on Sebi board’s agenda

The Securities and Exchange Board of India (Sebi) board is likely to discuss the issue of relaxing pricing norms and making it easier for stressed companies to raise capital through preferential equity sale to financial and strategic investors. The Sebi board — scheduled to meet on June 25 — will also discuss whether rules on pricing should be relaxed for all companies as per the demands of the industry. “Both the proposals are currently under consideration. But justification for stressed companies is very clear,” said a person familiar with the development. Another person familiar with the development said concerns have been raised on relaxations that are only availed of by promoters. “The larger issue is that if you see from an investor protection angle, some section of the market is saying why should Sebi give pricing relaxation only to promoters. The board will take a final call on this,” the person quoted above said. At present, the pricing rules require the issue price to be the average of the previous 26 weeks or the past two weeks, whichever is higher. “In tough market conditions, companies struggle to access capital and the 26-week average price becomes a challenge for promoters or non-QIB (qualified institutional buyers) investors. Sebi could consider building in protections such as requiring majority approval of minority shareholders or having a greenshoe type of option provided to all existing investors of the company to participate at the same terms as the promoters for say up to 25 per cent of the funds infused by the promoters,” said Ausang Shukla, managing director at Ambit.

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