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Our Bureau

Mumbai, Aug. 29 Companies making public or rights issues now have to obtain final letters of sanction of loans for the projects or plans for which they are raising funds, going by SEBI’s clarification on its Disclosure and Investor Protection Guidelines.

Currently the guidelines require that firms can go in for such issues only upon “firm arrangements of finance through verifiable means towards 75 per cent of the state means of finance (excluding the amounts proposed to be raised through the IPO or rights issue).”

SEBI has now clarified that debt funding from banks and financial institutions constitute “firm arrangement of finance”, only if the lender has given final sanction letters to the issuer company.

In the case of mega projects involving high debt component, SEBI has made an exception since the process involves more time for the issuer.

In these cases, the issue need obtain only “in-principle sanction” letters for the proposed debt funding.

The lead merchant bankers must satisfy themselves on the adequacy of funds available with the promoters.

The offer document must also contain adequate disclosures on how the lead merchant bankers have satisfied themselves.

SEBI has also notified several other amendments to the DIP guidelines.

SEBI has notified the amendments crunching the time lines in a rights issue. The other change is the exclusion of sub-accounts from the category of “foreign corporate” and “foreign individual” from the definition of qualified institutional buyer (which includes FIIs).

The regulator has also facilitated eligible listed companies to raise funds from QIBs without having to go through elaborate documentation.

For this, it has extended the modified pricing guidelines for QIP to preferential allotments to QIBs, provided the number of QIB allottees does not exceed five.

More Stories on : IPOs | Investor Protection

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