Sebi pegs minimum allotment size for anchor investors at Rs 5 cr, move to help companies bring in serious players.
The capital market regulator appears to be in a mood to appease companies which intend to go public at a time when investor confidence is hovering at record low levels. To start with, it has created a separate set of disclosures for funds (venture capital and private equity funds), that will make it easier for PE-backed entities to go public. Further, it has laid down a minimum allotment size for anchor investors to ensure only serious players enter the fray.
“Considering the constraints in disclosures by investee companies regarding funds (such as venture capital funds, etc) which are shown as a promoter of such an investee company, it has been decided to specify a separate set of disclosures for them,” said a release issued by the Securities and Exchange Board of India (Sebi) after its board meeting.
The move is significant, as it will encourage more PE players to take the mantle of promoters. Earlier, not many wanted to be designated as promoters and refrained from taking control of transactions because, in the event of an initial public offer or a rights/follow-on offer in case of listed companies, promoters are required to disclose their investments in all other companies. This was an issue for PE funds, as many did not want to make the details public.
Last week, Sebi dropped an appeal in the Supreme Court against PE fund Subhkam Ventures, which had picked up a stake in MSK Projects. Sebi had originally insisted that the fund take control of the target company. However, the Securities Appellate Tribunal overruled this order. The market regulator had contested the appellate decision in the Supreme Court.
The capital market watchdog has also pegged the minimum allotment size for anchor investors (AIs) at Rs 5 crore. The current norms are silent on the allotment size, while fixing the minimum application size at Rs 10 crore. According to investment bankers, the move will help companies get serious entities as anchor investors (a concept introduced by Sebi in June 2009), leading to lower volatility in the immediate months after listing.
The regulator, in due course of time, will also prescribe the maximum number of AIs, depending on the issue size. The current norms require at least two anchor investors if the issue size is Rs 250 crore, exceeding which there have to be at least five such entities. To make the concept more effective, it had been decided to prescribe a minimum allotment size of Rs 5 crore and the maximum number of AIs, slab-wise, said the release. Anchor investors have a lock-in period of 30 days.
Meanwhile, Sebi has also plugged a regulatory gap that allowed promoters to issue long-tenure warrants at the time of making a public or rights issue. To avoid any “possible misuse”, it has capped the tenure at 12 months. Incidentally, the move comes on the back of instances where the promoters had issued warrants with a tenure of 18 months, 24 months and even three years. The issuer will also be required to disclose utilisation of funds raised through warrants, both in the offer document as well as on a continuous basis.
Among other decisions, Sebi has raised the net worth requirement of debenture trustees from the existing Rs 1 crore — fixed in 2003 — to Rs 2 crore. Existing debenture trustees will get two years’ time to increase their net worth to the new level.
The top 100 companies in terms of market capitalisation will also be required to give “business responsibility reports”, which will include details about the fulfillment of environmental, social and governance responsibilities of listed entities.
“To assess the fulfillment of environmental, social and governance responsibilities of listed entities, it has been decided to mandate them to submit business responsibility reports, as a part of their annual reports, describing measures taken by them along the key principles enunciated in the ‘National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Business’ framed by the ministry of corporate affairs,” said the release.
Source: Business Standard