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Short-term relief: Easier norms for firms to raise funds

Short-term relief: Easier norms for firms to raise funds

The Securities and Exchange Board of India (Sebi) on Thursday eased norms for companies to raise capital via preferential issuances, albeit temporarily, till December 31.
At a board meeting, the regulator allowed companies to acquire shares via bulk and/or block deals, during open offers, and also amended the regulations relating to insider trading.

Companies can now price the shares at not less than the average of the weekly high and low of the volume weighted average price during the 12 weeks preceding or the two weeks preceding the relevant date, whichever is higher. The shares allotted using the new pricing formula will be locked in for a period of three years. They are free to choose between the new and existing guidelines.
Moin Ladha – partner, Khaitan & Co, said the shorter look-back period addresses the price fluctuation, given the Covid-19 pandemic and the lockdown. “However, the price has adjusted over a period of time and 12 weeks is still a longer look back — especially, when this comes with an additional lock-in condition for a three year period. Also, since both the pricing guidelines will remain in force, it is unclear if this revised formula is available for foreign investors.

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