SEBI allows more option in pricing of preferential issue

The Securities and Exchange Board of India (SEBI) on 25 June announced provision of an additional option to the pricing methodology for preferential issuance. The SEBI Board took the decision to provide temporary relief to companies amid the pandemic.

The said option in pricing should be available for the preferential issues made between July 1, 2020 or the date of notification of amendment to the regulations, whichever is later and December 31, 2020, the regulator said in a statement.

“In case of frequently traded shares, the price of the equity shares to be allotted pursuant to the preferential issue shall be not less than higher the average of weekly high and low of the volume weighted average price of the related equity shares quoted on the recognised stock exchange during the 12 weeks preceding the relevant date,” it said.

Further, the specified securities allotted on a preferential basis using the new pricing formula shall be locked in for three years, it said.

The existing pricing guideline for preferential issue, for frequently-traded shares, as prescribed under Regulation 164(1) of the ICDR Regulations shall also continue to remain in force. The issuer may choose any of the formula.

The SEBI board also approved amendments to its takeover regulations under which acquisition through stock exchange settlement process through bulk or block deals should be permitted during the open offer, subject to conditions.

In case of indirect acquisitions where public announcement of an open offer has been made, an amount equivalent to 100 per cent of the consideration payable under the open offer must be deposited two working days before the date of detailed public statement. The escrow account shall be in the form of cash or bank guarantee.

In case of delays in making open offer attributable to the acts of omission or commission of the acquirer, a simple interest of 10 per cent should be paid to all the shareholders who had tendered the shares in the open offer, the board said.

It has also approved amendments to the regulations for prohibition of insider-trading. The amendments included maintaining a structured digital database containing the nature of unpublished price sensitive information and the names of persons who have shared the information. It also talks about automation of the process of filing disclosures to stock exchanges, restriction on trading window not to be made applicable for transactions as prescribed by the SEBI.

“Entities to file the non-compliances of the code of conduct with the stock exchanges and amounts, if any, collected for such non-compliances shall be credited to Investor Protection Education Fund, administered by the board under the SEBI Act,” it said.