Markets watchdog Sebi has amended regulations to provide more leeway for companies to raise funds, including reducing the time gap between two qualified institutional placements to two weeks, amid the coronavirus pandemic. Amendments have been made to the Substantial Acquisition of Shares and Takeovers Regulations as well as the Issue of Capital and Disclosure Requirements Regulations, according to two separate notifications issued on Tuesday.
Now, promoters have been exempted from making an open offer if they acquire more than 5 per cent stake following preferential issuance of shares by a company. The temporary relaxation would be in place till March 31, 2021 and applicable for purchase of stake less than 10 per cent.
"The amendment will enable promoters to provide necessary equity funds to their company without incurring an obligation of open offer. This is especially important as companies are finding it difficult to access alternate methods of funding such as debt financing or access equity funding from third party investors," law firm Cyril Amarchand Mangaldas Partner and Head (M&A) Akila Agrawal said.
Besides, the regulator has relaxed the condition that there should be a time gap of six months between two qualified institutional placements (QIPs). The time gap has been reduced to two weeks now.
"This is an important relaxation as it will allow companies to regularly access investment from institutional investors through QIPs which is a faster and efficient manner to raise capital and not have to wait for a fixed time period before approaching investors," Cyril Amarchand Mangaldas Partner & Head (Capital Markets) Yash Ashar said.
Ashar noted that it was anyway unlikely to be every two weeks as markets and investors would not be very happy with such a narrow time gap, but companies are now enabled to raise within a few months of the previous deal.
Regarding the relaxation in open offer trigger, Agrawal said it would be interesting to see whether limited relaxation of only additional 5 per cent would meet commercial requirements of companies.
Against the backdrop of economic activities being disrupted by the coronavirus pandemic and subsequent lockdowns, various relaxations are being extended to companies in terms of regulatory compliance requirements.
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