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Raising funds from the bourses may soon become a simpler, shorter process, as the market regulator plans an overhaul of existing norms, taking them closer to standard global practices.

According to an official close to the development, the Securities & Exchange Board of India (Sebi) will rework the norms for instruments such as qualified institutional placements (QIPs), initial public offers (IPOs) and rights issues to enable companies to raise capital quickly, mitigating the risks arising out of sudden changes in market sentiment.

The proposals were discussed at a meeting of the Primary Market Advisory Committee on Monday, he said.

On the anvil is also a new entity called the anchor investor, who will get 25% of the shares out of the 60% reserved for institutional investors in a public offer.

This investor can be defined as “a strategic investor with a longer-term view compared to others”. This will help the company raise a lump sum amount at one go, but there will be no special pricing for the anchor shares.

According to the official, this investor cannot be related to the promoter or the promoter-group companies. There will also be a lock-in of three months.

Sebi is aiming to cut short the timeline for IPOs and rights issues to 15 days for the last few legs of the process. The procedure, beginning from the time the issue opens till the shares get listed, now takes 21 days to complete.

The regulator will also simplify the existing IPO application form, making it easier for market intermediaries to process the data, once the issue closes for subscription.

Besides, Sebi is looking at making the issue price of QIPs closer to the market price. As of now, QIP pricing is based on the two-week average of the firm’s stock price.

Merchant bankers whom ET spoke to said they had suggested that there should more flexibility in pricing a QIP. “In a QIP, you are making a private placement to institutional investors…so let them decide on the market-driven price,” said one of them, asking not to be named. Critics, however, argue that the move will lead to share prices being manipulated in a short period of time.

Last year, Sebi had modified the pricing provisions for QIPs, allowing companies to price the issue based on the average price of the two weeks preceding the relevant date.

The market regulator’s move is aimed at moving closer to the global practices by reducing the gap between the market price and the issue price of stocks in a QIP. It’s also looking to reduce the documentation work involved in all these various fund-raising windows available for promoters.

On rights issues, Sebi may insist on minimum disclosures, as all the information is available in the market. All that a company may now require to provide is the reason for raising funds.

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April 2024