Securities and Exchange Board of India (SEBI) has relaxed preferential allotment norms for promoters till March 2021. SEBI has allowed company promoters to acquire up to 10 per cent stake in the company through preferential allotment. The promoters can currently acquire only up to 5 per cent of the preferential issue. With SEBI tweaking the norm, companies can now raise funds faster from promoters.
The relaxation comes at a time when businesses are under seeing financial stress and urgently need capital amid the ongoing coronavirus crisis and economic slowdown. The capital markets regulator has also relaxed voluntary open offer norms and removed timeline restriction on voluntary open offer if shares are purchased within 52 weeks. In a separate gazette notification, SEBI also reduced the time gap between two qualified institutional placements from six months to two weeks.
A preferential issue is an issue of shares or of convertible securities by listed companies to a select group of persons to raise capital. It is considered to be the fastest way of raising capital.
Meanwhile, SEBI last month had asked listed companies to disclose to investors and stakeholders the impact of the coronavirus pandemic on their businesses in a timely and cogent manner.
Listed entities should evaluate the impact of COVID-19 pandemic on their business, performance and financials, both qualitatively and quantitatively, to the extent possible and disseminate the same to investors, SEBI said in a circular.
The regulator had also said that order will come into force with immediate effect, while it advised the stock exchanges (BSE and NSE) to bring the provisions of this circular to the notice of all listed entities and also disseminate the same on their websites.