Discuss the various ways in which Securities and Exchange Board of India can enable firms to raise capital during the crisis. (200 Words)
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IAS Parliament 4 years
KEY POINTS
· Sebi has issued and extended several temporary relaxations and one-time measures including extending the validity of observations on draft offer documents of companies; reducing the minimum subscription amounts in rights issues by companies; increasing permissible issue size variations from 20% to 50%; relaxing fast-track eligibility norms; and increasing the time period for the declaration of results by listed companies.
· Nonetheless, further select relaxations may provide the impetus for issuers to raise capital, especially from institutional investors, which, in turn, may triggebetter economic performance of businesses and restore investor confidence.
Indian Public Offerings (IPOs)
· To revive the IPO market, Sebi could look at reducing the minimum subscription requirements for fresh issues from the existing 90% to 75% along the lines of the recent relaxations for rights issues.
· The prolonged lockdown is expected to result in a material adverse impact on the financials of most companies. Since Sebi’s IPO norms have eligibility criteria based on financial performance, failing which at least three-fourths of an IPO has to be subscribed by qualified institutional buyers, this may place an undue strain on the marketing dynamics of IPOs.
· Sebi could consider granting a one-time relaxation in fundraising norms, allowing companies to comply with the eligibility requirements over an eighteen-month window, rather than the prescribed three-year period, or on the basis of any of the two of the previously completed three financial years.
Qualified Institutional Placements (QIPs)
· The regulator could explore reducing the time period for calculation of the floor price from the average of weekly high-and-low from two weeks to one week, primarily to address the volatility and risk-averse market environment. While any look-back period based pricing may be subject to volatility concerns, moving to a free-pricing regime or pricing pegged to the previous day may lead to concerns of manipulation and be unfeasible in the present circumstance.
· Further, increasing the potential discount to the floor price from 5% to 15% could be another move that would make life easier for companies.
Rights Issues
· Rights issues are in the spotlight today with Reliance Industries Limited launching India’s largest ever rights issue. While SEBI has provided relaxation to the fast-track criteria of compliance with listing conditions for a period of 18 months instead of the prescribed 3 years.
· While these additional measures could help in supplementing the Indian securities market regulator’s ongoing efforts to revive the general investor sentiment for the Indian markets amid the covid-19 crisis, each issuers’ ability to tap the market is dependent on their fundamentals and the overall economic scenario.
mahima 4 years
kindly review
IAS Parliament 4 years
Good attempt. Try to underline key points. Keep Writing.
Sonali 4 years
Please review
IAS Parliament 4 years
Good attempt. Try to underline key points. Keep Writing.
Surya 4 years
please review
IAS Parliament 4 years
Good attempt. Try to stick to word limit. Keep Writing.
