At a time when many corporates are facing fund crunch and defaults in the wake of the lockdown and closure of units, the Securities and Exchange Board of India (Sebi) has proposed exemption from making an open offer for the allottees, along with liberal pricing norms for preferential share issues of stressed companies. The markets regulator has proposed exemption from making an open offer for allottees of preferential issue in stressed companies if the acquisition is beyond the limit prescribed. To avail this exemption, listed companies need to ensure that preference issue is made to persons/entities that are not part of the promoter or promoter group on the date of the board meeting to consider the preferential issue, according to a Sebi draft paper. India Inc has closed down units across the country and sales have plummeted amid the lockdown. Sebi has proposed that pricing should not be less than the average of the weekly high and low of the volume weighted average prices of the related equity shares on a recognised stock exchange during the two weeks preceding the relevant date. Currently, the determination of the pricing covers a period of 26 weeks or more for frequently traded shares. It said, “Listed companies that are facing financial stress are generally in need of fund infusion to tide over the stress situation and thereby avoid insolvency or bankruptcy. Such listed companies face certain difficulties in raising capital through conventional means.”
