Among a slew of measures initiated by the Securities and Exchange Board of India (Sebi) on Thursday, the capital market regulator has specified a maximum tenure of 12 months for warrants issued along with public issues or rights issue of securities, to prevent any misuse of such instruments.
Moreover, the issuer would also be required to provide disclosures about the utilisation of funds so raised, both in the offer document as well as on a continuous basis.
?There is a loophole in the guidelines. If you issue warrants through preferential allotments they are required to be converted in 18 months and if warrants are issued to QIPs, they have a five year conversion window. So Sebi is plugging the gap,? explained a merchant banker.
At a board meeting on Thursday, Sebi also decided to make the concept of anchor investors more effective and has prescribed a minimum allotment size of R5 crore together with a maximum number of anchor investors, slab-wise. ?Lowering the floor to allow more anchor investors to participate is a good market especially in the context of the current market sitauation,? said S Ramesh, executive director, Kotak Investment Banking.
The Sebi board also decided that the net worth of debenture trustees be hiked from the existing R1 crore, which was fixed way back in 2003, to R2 crore. This was done by approving an amendment to regulation 7A of the Sebi (Debenture Trustee) Regulations, 1993.
The board also decided to give existing debenture trustees, a time period of two years to from the date of notification of the regulations, to increase their net worth. In addition, the capital market watchdog has decided to come up with a set of disclosure norms so that the stakes of venture funds in companies are disclosed separately and not clubbed together with that of the promoter.
The Sebi board also said listed entities would be mandated to submit business responsibility reports, as a part of their annual reports. To begin with, the requirement will apply to the top 100 companies, ranked by market capitalisation, and would be extended to other companies in a phased manner, the regulator said.
In 2009, Sebi introduced the concept of anchor investors, allowing them allocation of up to 30% of shares in a public issue. These investors are treated as qualified institutional buyers (QIBs) and would have to apply for a minimum of R10 crore, paying 25% of the amount on application and the remaining 75% within two days of the date of closure of the public issue.
Sebi rules stipulate a lock-in of 30 days on the shares allotted to these investors, from the date of allotment, and the rules say no person, related to the promoter or promoter group or the book running lead managers, can apply as anchor investor.
If the IPO issuer can find anchor investors, it indicates that the company enjoys good reputation and its public offer could be a success. One-third of the anchor investor portion shall be reserved for domestic mutual funds.