Sebi clips rights issue timeframe
The move is aimed at speeding up allotment
The Securities & Exchange Board of India (Sebi), on Thursday, announced a reduction in the rights issue allotment timeframe to 15 days and also made it clear that companies can utilise the proceeds only after the allotment was made.
To this effect, the market regulator has issued a circular wherein it has notified rationalisation of rights issue disclosure norms. In turn, this would encourage listed companies to look at rights issues as a viable form of capital raising by reducing the overall cost of such issuances and also make the process of such issues faster.
“Sebi has reduced the time period taken for finalisation of basis of allotment in the rights issues to 15 days from the earlier period of 42 days from the date of closure of the issue,” the regulator said. Further, Sebi stated that Application Supported by Blocked Amount (ASBA), would be applicable to all rights issue.
Initial public offering
“It has now been decided to make ASBA applicable to all rights issues,” the regulator said. Last September, the Securities and Exchange Board of India had enabled the ASBA facility to rights issue on a pilot basis. At present, it is applicable only to initial public offering (IPOs).
The very objective of introducing ASBA is to ensure that the investor’s funds leave his bank account only upon allocation of shares in public issues. Also, the ASBA process ensures that only the requisite amount of funds is debited to the investor’s bank account on allotment of shares. In this mechanism, the need for refunds is completely obviated.
