Sebi grants breather to firms, extends expiration date for IPO approvals

At present, the approvals given to IPOs are valid for a period of 12 months from the date of Sebi's final "observation". This has been extended by six months

The  Securities and Exchange Board of India (Sebi), has given a breather to companies by extending the expiration date for their IPO approvals. At present, the approvals given to IPOs are valid for 12 months from the date of Sebi’s final “observation”. This has now been extended by six months, subject to fulfilment of certain conditions.

“The validity of Sebi observations where the same have expired or will expire between March 1, 2020, and September 30, 2020, has been extended by six months, from the date of expiry of such observation,” Sebi said in a circular.

Further, it has allowed changes to the IPO structure. “The issuer shall be permitted to increase or decrease the fresh issue size by up to 50 per cent of the estimated issue size without requiring to file fresh draft offer document,” it said. However, Sebi said there has to be no change in the objects of the issue. Also, the relaxation is only for issues that open before the end of the current calendar year. Besides, Sebi has made some key relaxations to the rights issue framework. For fast-track approvals, “the eligibility requirement of the average market capitalisation of public shareholding of Rs 250 crore has been reduced to 

Rs 100 crore,” it said. 

The threshold for minimum subscription requirements for a rights issue has been reduced from the existing 90 per cent to 75 per cent of the offer size.

“In the wake of challenges for the Indian economy arising out of the Covid-19 pandemic and to improve access to funding to corporates through the capital markets, Sebi has decided to grant certain temporary relaxations from the regulatory provisions related to rights and public issuances by listed entities,” it said.

Industry players said the relaxations will help some issuers but the overall equity capital market activity this year will be hit because of the economic damage caused by Covid-19.