Sebi May Relax Rules on 6-Mth Gap Between Two QIP Issues

The Securities and Exchange Board of India (Sebi) on Monday proposed to relax the requirement of the mandatory six-month gap between two successive Qualified Institutional Placement (QIP) issues. The regulator said it has received requests from companies seeking a waiver on this requirement of a six-month cooling off period between two successive QIP issues. “The reasons for such exemption, as informed by the issuer companies, are urgent needs of funds and the fact that other fund raising mechanisms, such as a public issue or rights issue, are time-taking in comparison to a QIP issue,” Sebi said in a discussion paper that seeks public comments by April 15. The proposal was discussed by Sebi’s expert committee on primary markets. To address concerns of companies and to support fundraising, relaxation may be provided for successive QIPs within six months of previous QIP issues, in cases where terms of placement for the subsequent issues are disclosed upfront in the special resolutions. Separately, Sebi has also proposed to exempt listed companies from following delisting rules in case of a merger with its listed subsidiary.

“It is observed that there are listed companies which have listed subsidiaries, and equity shares of both are actively traded on stock exchanges. In a number of these cases, both the listed subsidiary and its listed parent company are in the same or similar business, with significant synergies by working together and creating significant incremental shareholder value for both companies,” Sebi said in a discussion paper that also seeks public comments by April 15. The regulator proposed that the listed parent company may integrate the business of the listed subsidiary with that of its own by providing a share swap to all shareholders of the subsidiary through a scheme of arrangement. Following which, the listed subsidiary would become an unlisted wholly owned subsidiary of the parent listed entity.

At present, if a listed subsidiary desires to get delisted, it would be required to follow the delisting norms, which include a reverse book building process. “However, in the proposed scenario, the listed subsidiary would be delisted without following the Delisting Regulations. The shareholders of the listed subsidiary company will be offered shares of the listed parent company and the listed subsidiary will continue to exist, albeit as a wholly owned subsidiary of the parent company,” Sebi said.

The Economic Times, 17th March 2020