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SEBI relaxes preferential pricing norms, amends open offer rule

SEBI relaxes preferential pricing norms, amends open offer rule

SEBI relaxes preferential pricing norms, amends open offer rule
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By Yash Jain  Jun 25, 2020 7:36 PM IST (Updated)

Markets regulator Sebi on Thursday decided to temporarily relax pricing framework for preferential allotment of shares as part of efforts to liberalise norms for raising funds amid the coronavirus pandemic.

Market regulator SEBI has decided to relax pricing regulations for preferential share allotment to encourage companies to raise funds from the market. The market regulator has provided an additional option for pricing preferential issuance of shares.

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According to the rule, companies, to price their preferential issue, will be allowed to consider the average of weekly high and low of the volume weighted average price during the previous 12 weeks or the previous 2 weeks, whichever is higher.
SEBI also added that companies opting for the new pricing formula will have the securities allotted for a period of 3 years.
The said option in pricing will be available for the preferential issues made between July 1, 2020 and date of notification of amendment to the regulations, whichever is later and December 31, 2020," the release said.
In the wake of serious challenges faced by the corporate sector due to COVID-19, the regulator had been receiving representations from various stakeholders for temporarily liberalising regulations relating to raising of capital from the securities market.
Experts believe that the move will help get more realistic pricing for preferential issues considering the kind of damage which the share prices of a large number of companies have seen in the recent past.
The regulator also made certain amendments to the Substantial Acquisition and Takeover Regulations, allowing acquisition of shares by way of stock exchange settlement process through bulk and/or block deals during the open offer.
Approving more amendments to the Substantial Acquisition and Takeover Regulations, SEBI said in case of direct acquisitions where public announcement for an open offer has been made, an amount equivalent to 100 percent of consideration payable under the open offer must be deposited in an escrow account for two working days before the date of detailed public statement. SEBI added that the escrow account shall be in the form of cash and/or bank guarantee.
The market regulator also said that in case of delays in making an open offer attributable to the acts of omission and commission of the acquirer, a simple interest of 10 percent will be paid to all shareholders who have tendered their shares in the open offer.
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