To streamline the process and make rights issues more market-friendly, the Securities and Exchange Board of India (SEBI) has proposed several changes, including eliminating the requirement to file a draft document for rights issues.
SEBI is also considering allowing companies to conduct rights issues without involving a merchant banker and offering more flexibility in the allotment process for select investors.
In a consultation paper released on August 20 titled ‘Faster Rights Issue With Flexibility of Allotment to Selective Investors,’ SEBI proposed removing the need for a Draft Letter of Offer (DLoF) submission to the regulator. The paper aims to make rights issues a more attractive fundraising method, as data shows that only ₹15,110 crore was raised through rights issues in FY24, compared to ₹68,972 crore through Qualified Institutional Placements (QIP) and ₹45,155 crore through preferential allotments.
SEBI also suggested simplifying the Letter of Offer (LoF) by reducing disclosures to essential information like the purpose of the issue, pricing, record date, and entitlement ratio. The discussion paper proposes that the issuer, Registrar to the Issue, and Stock Exchanges handle tasks currently managed by the Merchant Banker. It also suggests that Stock Exchanges and depositories could take over some responsibilities traditionally held by registrars.
Additionally, SEBI proposed shortening the rights issue timeline to T+20 days, which would allow completion within 20 days after board approval. Currently, non-fast-track rights issues take about 300 days on average, while fast-track issues take around 100 days.
SEBI aims to address delays caused by various regulatory steps and is considering allowing the allocation of shares to specific investors by enabling the transfer of rights entitlements to a chosen group. This would require full disclosure of details and prevent investors from withdrawing applications once submitted.
Any unsubscribed portion of a rights issue could be allocated to selected investors with full disclosures. SEBI also proposed extending the ICDR Regulations to all rights issues, including those under ₹50 crore, to ensure consistency in the process.
