The SEBI's new norms could help the already heated-up Indian IPO market fare better in coming months.
The SEBI's new norms could help the already heatedup Indian IPO market fare better in coming months.
Aprice band can be announced two working days before commencement of an initial public offer (IPO). This was one of the major decisions taken by the Securities and Exchange Board of India (SEBI) in its recent board meeting.
The capital and commodities market regulator approved various amendments to the Issue of Capital and Disclosure Requirements) Regulations ( ICDR Regulations) at the board meet, making it easier to raise capital from the market. While approving amendments to the ICDR Regulations, the board considered the recommendations of the primary market advisory committee and the public comments received on a consultation paper.
According to the regulator, the amendments are mainly aimed at simplifying the language, removing redundant provisions and inconsistencies as well as updating references to Companies Act, 2013. Talking to reporters after the board meeting, SEBI Chairman Ajay Tyagi said that changes to takeover as well as buyback regulations have been approved.
At present, the price band has to be announced five working days before an IPO opens for subscription. "The requirement of announcing the price band five working days before opening of the issue would be reduced to two working days before opening of the issue," the SEBI has said in a release. With regard to public and rights issues, the financial disclosures will have to be made for three years as against the present requirement of five years.
According to the release, restated and audited, financial disclosures in the offer document will only be on a consolidated basis. Besides, the audited, standalone financials of the issuer and material subsidiaries will need to be disclosed on the website of the issuer company.
"Threshold for submission of draft letter of offer to SEBI in case of rights issues will be increased to Rs 10 crore as against the earlier prescribed Rs 50 lakh," the SEBI's release adds.
The market regulator has also approved changes to takeover regulations, wherein entities will get additional time for upward revision of an open offer price during the share-tendering period. Besides, buyback regulations will also be amended.
In this regard, changes will be made to the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011. "It has been decided to grant additional time for upward revision of open offer price till one working day before the commencement of the tendering period," the SEBI has said. The watchdog will be reframing buyback regulations with inclusion of a definition of the buyback period.
The SEBI is also planning to amend various norms governing entities undertaking third-party assignment under the securities law. The markets regulator will issue a consultation paper on the subject.
In a release, the SEBI has said that fiduciaries in the securities market have a significant role to play in terms of credible reporting of disclosure, financial information and compliance with regulations.
Fiduciaries, such as merchant bankers, credit rating agencies, custodians, debenture trustees and registrars to an issue, are registered with the SEBI. However, many others, including chartered accountants, company secretaries, cost accountants and valuers, who take up assignments from issuers or market intermediaries, are currently not registered with the SEBI.
Against this backdrop, the SEBI board has approved issuance of a
"The amendments are mainly aimed at simplifying the language, removing redundant provisions and inconsistencies as well as updating references to Companies Act, 2013."
AJAY TYAGI, Chairman, SEBI
consultation paper to amend various regulations in respect of entities that undertake third-party fiduciary assignment under securities laws.
This will cover assignments taken up for issuers, pooled investment vehicles, intermediaries and market infrastructure entities.
Besides, the board has also decided to do away with the category of sub-brokers as market intermediaries. "No fresh registration shall be granted as sub-brokers. Registered sub- brokers shall migrate to authorised persons or trading members. Sub-brokers who do not choose to migrate, shall be deemed to have surrendered their registration as subbroker," the release has said. The regulator will provide a suitable time to facilitate the transition.
The market regulator has also initiated enforcement actions against various entities in the NSE co-location case. The watchdog has been probing the alleged lapses in high- frequency trading offered through the NSE's co-location facility. "We have received the NSE investigation report in the co-location case and have initiated enforcement actions," Mr Tyagi has added.
Meanwhile, changes in the primary market brought in by the SEBI, such as recasting capital-raising norms for companies and easing disclosure requirements, are likely to help further the already heated-up Indian IPO market.
Market watchers note that while some of the moves are in investors' interest, they are still unlikely to kill the grey market. Jimeet Modi, the CEO and founder of Samco Securities, notes that the decisions may have no impact on the grey market.
In times of fast-moving internet, where banking transactions are being conducted online and messages become viral within seconds, the grey market will still exert influence irrespective of the curtailment of IPO pricing timeline to two days from five, he adds.
"The regulations are quite issuerfriendly. They will help more and more companies raise funds from the capital market with lesser risks. For example, the cut in time for price band announcement to two days will reduce market-related uncertainty for the issue, if the broader market sentiment is weak. Easing of financial disclosure requirement will bring in more listings," points out Prime Database Managing Director Pranav Haldea.
While a cut in the timeline for financial disclosures to three years from
"The regulations are quite issuer-friendly. They will help more and more companies raise funds from the capital market with lesser risks."
PRANAV HALDEA MD, Prime Database
five is expected to bring in more listings, that move is not seen as a big positive for investors. Analysts note that the longer the financial history of an issuer is available, the better it is for investors to understand the company's background. After all, numbers speak loud and clear, they add.
The SEBI's changes in primary market norms come at an interesting time. Globally, Indian exchanges recorded the highest IPO activity as the country saw 90 IPO launches that raised $3.9 billion in the first half of 2018, according to EY India IPO Readiness Survey Report.
The report adds that Indian exchanges recorded the highest IPO activity in terms of number of deals accounting for 16 per cent of the total issues in the first half of this year. In terms of proceeds though, Indian exchanges accounted for a mere 5 per cent of global proceeds in the January-June 2018 period. The market regulator's new norms could help the Indian IPO market better its record in terms of proceeds too.