The regulator highlighted that issuers perceive a higher exposure to price risk due to current rights issue process while investors expect allotment and listing timelines to be shortened.
Total fund-raising through rights issues has crossed an all-time high level of Rs 50,000 crore this year, owing to the ones by Idea Vodafone and Bharti Airtel in April and May. The rights issue of Vodafone Idea worth Rs 25,000 crore was oversubscribed approximately 1.08 times and the public participation was approximately 1.2 times. The rights issue of Bharti Airtel worth Rs 25,000 crore was also oversubscribed. The board of Bharti Airtel approved the rights issue through issuance of fully paid-up shares at a price of `220 per share.
Other companies that raised funds through rights issue this year include LGB Forge (`26.46 crore), Krebs Biochemicals and Industries (`24.82 crore) and Bharat Gears (`12.21 crore) , according to data shared by Prime Database.
These five companies raised a total of `50,000 crore since the beginning of the year, with Idea Vodafone and Bharti Airtel constituting a major pie of the share. In 2008, 26 companies were able to raise `29,797 crore, which is the second-highest amount of funds raised via the rights issue route. In 2018, 13 companies raised `18,826 crore, with Tata Steel raising the highest amount at `12,703 crore.
With rights issue suddenly becoming an option for telecom companies to raise huge funds this year, Sebi on May 21 in its circular announced plan to reduce time taken for rights issues. The regulator highlighted that issuers perceive a higher exposure to price risk due to current rights issue process while investors expect allotment and listing timelines to be shortened.
The current process of trading of rights entitlement, which is settled physically with low liquidity, is also needed to be addressed, Sebi said. The regulator added that it is planning to halve the rights issue timeline — the duration between a company deciding to launch the rights issue and the listing of new shares. Currently, it takes a little less than two months for the rights issue process to get over. Sebi has proposed changes to the framework which will bring down the timeline up to 31 days.