The Securities and Exchange Board of India on Thursday relaxed the rules for the issue of preference shares by giving companies the option of pricing these shares using shorter time periods.
But there is a rider: there will be a three-year lock-in for the shares priced under the new formula.
Under the existing formula, companies are required to price their preferential shares after separately calculating the average of the weekly high and low of the volume weighted average price of the share during the 12 weeks and two weeks preceding the relevant date. The higher of the two will be the price for the preferential share issue.
Under the existing formula, the price is determined by taking the higher of the average price over a 26 week and a two week prior period. Companies can opt to use the existing pricing formula without attracting the lock-in restriction.
The option in pricing would be available for the preferential issues made between July 1 or the date of notification of amendment to the regulations, whichever is later, and December 31.
Companies have been demanding a relaxation of the pricing methodology because the existing formula could deter investors from buying the preferential shares after the battering that stocks have taken since the pandemic-induced lockdown.
The Sebi board also made changes in open offer regulations and cleared amendments to insider trading regulations. It also decided to streamline settlement regulations to make procedures faster and more effective.
Sebi would also permit purchase of shares through bulk or block deals during an open offer.
In case of indirect acquisitions where the public announcement of an open offer has been made, the entire consideration payable under the open offer must be deposited two working days before the date of detailed public statement, the regulator said.
In case, there is a delay in making the open offer due to the acquirer, a simple interest of 10 per cent would be paid to all the shareholders, who have tendered the shares in the open offer.
