Sebi amends DIP guidelines, tightens warrant conversions

Written by Markets Bureau | Mumbai, Aug 28 | Updated: Aug 30 2008, 04:38am hrs
Taking the process of making capital issuances by corporates faster and to mitigate risks involved, the Securities & Exchange Board of India (Sebi) has announced new amendments to the Disclosure and Investor Protection (DIP) guidelines.

Amongst the significant announcements, the regulator has decided to rework the definition of the Qualified Institutional Buyer (QIBs). And under the new amendments, sub-accounts falling in the categories of foreign corporate and foreign individual have been excluded from the QIB definition.

Currently, foreign institutional investors (FIIs) registered with the Sebi are included in the definition of QIBs. These FIIs invest in securities in the primary market, either on their account or on behalf of their sub-accounts. Now, they would be eligible for QIB status.

In another move, Sebi has tightened the norms for the lock-in period for conversion of warrants. As per the current guidelines on preferential allotment, warrants issued on preferential basis were subject to lock-in for a period of one year or three years. And, the lock-in on shares allotted on exercise of such warrants could be reduced to the extent such warrants have already been locked-in. So if a company had a lock-in of two years and six months on the conversion of warrants, the lock-in for the converted shares would be the remaining six months.

Now, the Sebi amendments entail that shares so allotted pursuant to exercise of warrants to full lock-in period of one year or three years, as the case may be, from the date of allotment of such shares. The earlier lock-in will not be adjusted against the lock-in prior to warrant conversion.

Making matters easier for companies that have been involved in a merger, demerger or any arrangement with other listed companies, Sebi has relaxed the listing guidelines. The earlier guidelines stipulated that the company had to have been listed on a stock exchange having nationwide presence for at least a year. This did not allow companies who have had a merger or demerger activity to utilise the QIP route.

Now, it has been decided that for the purpose of fulfilment of the listing eligibility criterion, such companies can now take into account the listing history of the listed companies with which they have entered into the approved scheme of merger or demerger or any other arrangement. The easing of pricing norms was announced earlier by the Sebi, after its board meeting where it reduced the pricing time frame to two-weeks before the issue, from the two-weeks and six month norm.