The Hindu Business Line : SEBI extends validity period of IPOs, rights to one year

Mumbai, Dec. 4 Indian companies will now have one year’s time to launch their IPOs or rights issues after their draft prospectus has been cleared by SEBI.

The stock markets regulator at its board meeting on Thursday decided to extend the validity of its approval for IPOs and rights issues from three months currently, to one year, subject to updating of documents by the issuer.

In the past, many companies had to again file their draft red herring prospectus if they failed to launch the IPO or rights issue within three months getting SEBI’s approval.

Mutual Funds

To ease redemption pressure on mutual funds, the board has curbed early exit from close-ended schemes.

SEBI has also made it mandatory for all new close-ended schemes to be listed on the stock exchanges. Schemes, which have been approved earlier but yet not launched, will also have to list on the exchanges, said SEBI. Investors can now make an early exit from such schemes only through the secondary market and not through the fund house.

For such close-ended schemes, the underlying assets will not have a maturity beyond the date on which the scheme expires, SEBI said.

To speed up and streamline the rights issue process, the board also approved the introduction of an alternative mode of application i.e., ASBA mode (application supported by blocked amount). Here the application money is blocked in the applicant’s bank account till the time of allotment of the shares. The ASBA mode has already started functioning in the case of application for IPOs through select SEBI-approved banks.

The board also approved electronic trading of “rights entitlement” in stock exchanges.

The right entitlement will now be made available in demat form for all shareholders holding the underlying shares in demat form.

Until now, a shareholder intending to renounce his/her rights entitlement had to do it by applying physically through a designated application form.

Transparency measures

The board also decided to adopt a “code” for members of the board to avoid any conflict of interest that may arise; this will be put up in the public domain before December 12.

In order to bring transparency in the working of the board, the agenda papers submitted to the board on all policy issues, and the minutes of the meeting relating to such items will be made available in the public domain, said SEBI’s news release.

Accordingly, the agenda papers for Thursday’s board meeting will be made available on the SEBI Web site by December 15, said Sebi.

RSEs

SEBI board it is learnt also cleared the much-talked about exit option for RSEs at its board meeting, although no formal announcement was made in the press conference held later in the day.

According to sources, SEBI has created an exit option for RSEs, subject to payment of statutory liabilities.

Also, the investor protection fund, with the RSEs will now be entrusted to SEBI.

In addition, the subsidiaries of the RSEs will be allowed to function as independent brokers, said sources.

Mr T.V. Mohan Das Pai, Director - Human Resources, Infosys, the new nominee on the SEBI Board also attended the meeting. Mr Pai has replaced the earlier nominee Mr Venu Srinivasan, CMD, TVS Motors.