To boost fund raising from markets, capital markets regulator Sebi on Thursday proposed e-IPO norms where investors can bid for shares through Internet and eventually on mobiles, while already listed PSUs will be provided a 'fast-track' route for share sales to meet the disinvestment targets.
For already listed companies as well, Sebi has proposed a fast-track route for raising of funds through FPOs (Follow-on Public Offers) or Rights Offers (where funds can be raised from existing shareholders).
Under the new norms, Sebi has proposed to drastically cut the timeline for listing of shares within 2-3 days of the IPO, as against 12 days currently.
The fast-track route of raising capital has been proposed for companies having public shareholding market valuation of as low as Rs 250 crore, as against Rs 3,000 crore currently.
The public sector entities can tap the 'fast-track' route even without complying to this minimum average market value limit, provided they meet other conditions, Sebi said.
Under the 'fast-track' route, a listed company would not be required to file any draft offer document for its FPO or rights issue and they can proceed with fund-raising programme without necessarily getting 'observations' from Sebi.
Sebi has invited public comments till January 30, after which it would put in place final norms for e-IPO as also for fast-track issuances.
The proposed moves are part of efforts to simplify the process of IPOs, lowering their costs and helping companies reach more retail investors in small towns.
Initially, investors would be able to place bids through Internet and by using broker terminals across the country, as against current practice of filling long paper forms.
A framework for use of mobile applications for making bids in public issues can also be put in place for implementation in future, Sebi said.
Investors would also get SMS/e-mail alert for allotment under the IPO, similar to alerts being sent to investors for secondary market transactions.
Further, on account of reduction in printing of application forms, the overall cost of public issues will also come down.
Sebi said that these proposals may be used for debt issues as well. However, in order to make this mechanism applicable to debt issues, suitable amendments may be required under SEBI (Issue and Listing of Debt Securities) Regulations, 2008.
Under the proposed e-IPO mechanism, investment in public offerings can be done online without signing any physical document.
e-IPOs will help fast-track the public offer process and lower the costs, besides allowing investors to apply for shares and buy these at a click on computers without the need for signature on bulky physical documents.
Currently, applications for IPOs can be uploaded on a real-time basis only through ASBA (Application Supported by Blocked Amount). Only self-certified syndicate banks are authorised to manage and offer ASBA, which allows application money to stay in an investor's bank account until the shares are allotted.
This will facilitate more retail investors in IPOs and the issuance process is likely to undergo a sea change, resulting in reduction in timelines.
At present, the time taken for a company to get listed after initial share sale is around 12 days. Sebi might reduce the post issue timelines from T+12 days (12 days from issue closure to listing and trading) to T+6 days.
Once the process gets stabilised, timelines could be further curtailed to T+2/3 days.
With regard to fast-track issuances of Follow on Public Offer (FPO) and rights issue, Sebi proposed that route can be extended to companies having an average market capitalisation of between Rs 250 crore to Rs 3,000 crore.
However, for opting fast-track route, Sebi said that shares of these firms should not have been suspended (except for corporate actions) from trading in past three years.
Besides, issuer, promoter group and directors of such firms should not have settled any alleged violation of securities laws through the consent mechanism with Sebi in last three years.
Further, such a company should not have direct or indirect conflict of interest with the lead manager, its group or associate company among others.
For facilitating divestment of Central Public Sector Enterprises (CPSEs), Sebi has recommended that the fast-track issue route would be available to them "without the requirement of a minimum average market capitalisation of public shareholding, subject to CPSEs complying with all the other existing conditions for fast-track route."
"Also, in case where CPSE is not able to comply with any of these conditions, Sebi may, based on the merits of the case, consider granting exemption," the discussion paper said.
"Participants in various forums have indicated that issuers have inclination towards private placement, because of shorter time frame and lower costs associated with such route," Sebi said.
Therefore, the regulator has been examining ways to further facilitate capital raising by existing listed firms through FPO/Rights issue so as to provide retail investors the opportunity to participate in subsequent offerings and enable issuers to mop-up funds in the shortest possible time span.