MUMBAI: Markets regulator, Securities and Exchange Board of India (Sebi), is likely to consider relaxing pricing norms for preferential allotment that will allow listed companies to raise funds at a time when businesses are under pressure due to the covid-19 pandemic, said two people aware of the development.
Currently, pricing of a preferential allotment cannot be less than the average of weekly high and low for 26 weeks and average of weekly high and low for two weeks preceding the relevant date.
Recently, Sebi had proposed easing the pricing of a preferential allotment for stressed companies by allowing it to be determined only on the average of the previous two weeks price of the shares, as on the relevant date.
An email sent to Sebi on Wednesday did not elicit a response.
“There have been multiple representations from the merchant banking industry and law firms to allow this two week pricing for all companies and not just for so-called stressed companies,” said the first person cited above, requesting anonymity.
Given the crash in stock prices due to the covid-19 crisis, using the average for the previous 26 weeks will throw up a price significantly higher than the prevailing market rate, thus making it difficult to take a call on the investment, the person added.
Such a relaxation could significantly help companies raise funds through preferential allotment of shares to private equity (PE) funds and strategic investors. This will also allow promoters more flexibility to bring in capital.
The pricing relaxation on preferential allotment, if it happens, will come with a sunset period, added the second person cited above.
“The regulator is likely to give this relaxation only for a limited period which may be till September or December,” said the second person, also requesting anonymity.
Since the start of the lockdown on 25 March, Sebi has been actively relaxing various compliance and fundraising norms. Fundraising options such as rights issues and initial public offerings (IPO) have already been made easier for companies.