Sebi simplifies buyback norms, changes timeline for IPO pricing

The Sebi board at its meeting on Thursday approved certain amendments to Sebi (Substantial Acquisition of Shares and Takeovers) Regulations, 2011. The amendments, among other things, provide for grant of additional  time  for  upward  revision  of  open  offer  price  till one working day before the commencement of the tendering period.

Sebi had earlier, on 28 March, issued a discussion paper soliciting public comments  for  reviewing  the  Sebi  Takeover  Regulations. The  amendments  are mainly  aimed  at  simplifying  the language, removing redundant provisions and inconsistencies, updating the references to the Companies Act, 2013/ other new SEBI Regulations,  and  incorporating  the relevant  circulars, FAQs,  informal guidance in the regulations.

Replacing Sebi (Buy-back of Securities) Regulations, 1998 with new SEBI (Buy-back of Securities) Regulations, 2018.

The Sebi board approved a new set of Sebi (Buy-back of Securities) Regulations, 2018 in lieu of the extant Buyback Regulations, 1998, incorporating provisions outlined under Sections 68 and 70 of the Companies Act, 2013.

Under the new regulations, the buyback period has been defined as the period between board of directors resolution/date of declaration of results for special resolution authorising the buyback of shares and the date on which payment consideration is made to the shareholders.

The board approved the proposed Sebi (Issue of Capital and Disclosure Requirements) Regulations, (ICDR Regulations) 2018, based on the recommendations of the Primary Market Advisory Committee (PMAC) and public comments.

As per the proposals approved by the board, the requirement of announcing price band five working days before opening of the issue would be reduced to two working days before opening of the issue.

The time for financial disclosures in case of public issues / rights issues has been reduced to three years as against the current duration of five years.

Restated and audited financial disclosures in the offer document have to be made on consolidated basis. Audited standalone financials of the issuer and material subsidiaries have to be disclosed on the website of the issuer company.

The threshold  for  submission  of  draft  letter  of  offer  to  Sebi  in  case  of  rights issues has been increased to Rs10 crore as against the earlier prescribed Rs50 lakhs.

Shortfall of up to 10 per cent in minimum promoters’ contribution may be met by institutional investors such as by foreign venture capital investors, scheduled commercial banks, public financial institutions and insurance companies registered with Insurance Regulatory and Development Authority of India, in addition to Alternative Investment Funds, without being identified as “Promoters”.

For a company to be eligible to make a fast-track rights issue, it should not have any audit qualifications or adverse opinion. It has been decided to delete chapter on Institutional Placement Programme, provisions pertaining to safety net and IPO grading

Minimum anchor investor size for SME-IPO has been reduced to Rs2 crore from the existing Rs10 crore. For promoter group, the concept of immediate relative has been retained as against the proposed concept of ‘relative’. The shareholding threshold for identifying promoter group has been revised from 10 per cent to 20 per cent. In case the promoter is a body corporate, any body corporate in which the promoter holds 20 per cent or more or which holds twenty per cent or more of the promoter would be classified as being part of the same promoter group. 

Also, in case the promoter is a body corporate, any body corporate in which  a  group  of  individuals  or  companies  or  combinations  thereof, which holds 20 per cent or more of the equity share capital in that body  corporate,  also  holds  20  per cent  or  more  of  the  issuer,  can  be classified as promoter group only if they are acting in concert.

For disclosures, the definition  of  group  companies has  been made more  specific  by  clarifying that group company/companies, shall include such companies   (other than promoter(s) and  subsidiary (ies) with  which  there  were  related  party transactions, during the period for which financial information is disclosed (3 years), as covered under the applicable accounting standards and also other companies as considered material by the board of the issuer.

Insurance companies and foreign portfolio investors except for Category III, promoted by entities related to the lead manager/s as well as mutual funds promoted by lead managers, are permitted to participate in the anchor investor category.

Sebi has also aligned IPO underwriting provisions to requirements of minimum subscription if 90 per cent of the fresh issue is subscribed in a main board IPO, underwriting  will  be  restricted to that portion only and accordingly the requirement to underwrite 100 per cent of the issue without regard to the minimum subscription requirements has been deleted.