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Saturday, Dec 18, 2004

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SEBI plans changes in calculation of preferential issue pricing

Our Bureau

Mumbai , Dec. 17

THE Securities and Exchange Board of India is considering changing the method of calculation of minimum price of preferential issues.

As per public comments received on the draft circular published earlier, the market regulator is considering that instead of the weekly high and low of the closing prices of shares, the weighted average price of the shares based on all transactions on the exchange is to be taken. This is because the weighted average price is more representative, as per the comments received.

Also, in the case of frequently traded shares, the issue of equity shares on a preferential basis should not be lower than the average price of the share for a period of 130 trading days preceding the relevant date, or the average price of the share for the preceding 10 days, whichever is higher.

The impact of this change is not very significant as illustrated under. In the recently concluded open offer of Skanska Cementation, the 26-week and 2-week prices were Rs 195.86 and Rs 208.23, respectively. Under the new method, these would be Rs 195.27 and Rs 208.67, instead.

Similarly, in the open offer of Balaji Telefilms that closed on November 17, the minimum price was Rs 78.23 and Rs 87.43 for 26 weeks and 2 weeks, respectively. These would now be Rs 77.74 and Rs 88.11, respectively.

`Relevant date' indicates the date 30 days prior to the date on which the general meeting of the shareholders of the company is held to consider this issue.

The existing time-line of 15 days for completion of allotment from the date of resolution has been extended to 21 days with a caveat that, in addition to allotment, all effective steps for listing and trading should have been completed within the period, said a SEBI release.

A concept of `relevant equity shares' is being introduced to create a regulatory framework for preferential issue of shares with differential voting rights. In order to ensure the availability of preference stock market quotations, it is now required that the shares be listed for a minimum of 12 months.

While earlier there was a choice with respect to relevant dates for warrants, this has now been dropped. With a single `relevant date', the price at which shares are to be issued against the warrants is crystallised at the time of adoption of the resolution, with clarity on the minimum amount to be paid at the time of allotment of warrants.

SEBI is inviting public comments on these modifications, before it is finally issued as a guideline. Comments can be posted from SEBI's Web site

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