Equity float put on fast track

No Sebi approval needed for rights, follow-on issues by large firms.

The Securities and Exchange Board of India (Sebi) today put equity float by large-cap companies on the fast track.

A new scheme called the 'fast track share issuance programme' says companies with a three-year listing track record on the National Stock Exchange and the Bombay Stock Exchange, and with free-float market capitalisation of at least Rs 10,000 crore, can raise funds through rights and follow-on issues, without having to wait for the market regulator's clearance.

There are only 35 companies listed on the BSE and NSE having a free float market cap of Rs 10,000 crore or above. The list includes Reliance Industries, ICICI Bank, Infosys Technologies, Larsen & Toubro, Bharti Airtel, HDFC, ITC, Reliance Capital, among others. 
 

MORE ELBOW ROOM
Year	FPOs	Amount (Rs cr)	Rights  issues	Amount (Rs cr)
2003	2	480.00	19	697.42
2004	9	17389.36	29	3,311.41
2005	19	12764.12	32	4,386.58
2006	19	4816.80	39	3,531.05
2007*	3	10679.25	12	995.78
* Till July, 2007                                             Source : PRIME

The recently listed DLF Ltd and Suzlon Energy, which fulfil the market-cap criterion, will have to wait for some more time to take advantage of the new rule.

"This is a welcome move as it opens up the capital market. We assume that apart from rights and follow-on offers, issuance to qualified institutions are also covered under the fast-track scheme. This will make the market very efficient for the fund-raising programmes of large companies," said Rashesh Shah, managing director, Edelweiss Securities.

In 2007 till date, 12 companies have come out with rights issues. Last year, 39 companies had floated right issues. Clearances took on average three months.

The new scheme is according to the recommendations of Sebi's Primary Market Advisory Committee.

Sebi said companies would receive in-principle approvals from stock exchange, immediately after they receive shareholders' approval for the fund-raising plans.

The regulator said its latest decision was aimed at providing a faster and cost-effective method of raising capital by listed companies.

Sebi also said the listed companies that meet the requirements would be eligible for "rationalised disclosures as well as simplified procedural requirement."

Once a company's board or shareholders pass a resolution to raise necessary capital from the market, the firm will get in-principle approval from stock exchanges.

Companies, to qualify for the new regime, should need to have "excellent track record in redressing shareholders and investors' grievances", a Sebi press release, issued late in the evening said.

Further, the promoter group shares should be held in a dematerialized form.

The companies should also comply with the listing agreement with Sebi.