Tags:
Journalism of Courage
Making it easier for listed corporates to raise funds, market regulator Sebi today allowed private placement of shares with cash-rich qualified institutional buyers (QIBs).
As of now, an Indian corporate had to make provisions for retail investors for every follow-on issue. This has led to increased cost of offers and coporates were preferring to take the GDR or ADR route.
With today’s move, corporates will be encouraged to raise funds in India, thus retaining liquidity within the borders. The cost involved in raising funds from QIBs like mutual funds, banks and FIIs is negligible. It’s faster also.
In a statement, the Sebi said qualified institutional buyers should not be promoters or promoters’ relatives and a minimum of 10 per cent of the securities in each placement can be allotted to mutual funds. ‘‘It’s a big positive news for corporates as retail portion of an issue made it very expensive to raise funds by publishing a prospectus, forms and opening offices to accept funds,’’ said a Mumbai-based merchant banker.
This also means that retail investors are now excluded from follow-on offers by Indian corporates to QIBs.
For each placement, the Sebi today said there should be at least two allottees for an issue of size up to Rs 250 crores and at least five allottees for an issue size in excess of Rs 250 crore. Further, no single allottee will be allotted in excess of 50 per cent of the issue size, the Sebi said.
The aggregate funds that can be raised through QIBs in one fiscal will not exceed five times of the net worth of the issuer at the end of its previous financial year, the market regulator clarified.
