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Friday, March 13, 2009

Sebi proposes relaxing disclosure norms for rights issues

Invites comments from the public by 28 March 2009

The market regulator Securities & Exchange Board of India (Sebi) on Thursday 12 March 2009 proposed relaxing the disclosure norms for rights issues to reduce overall cost of issuance. Rights issues are further issuance of capital made by listed entities to its existing shareholders.

Sebi said it may suffice to have a more restricted set of disclosures rather than exhaustive disclosure requirements about the rights issue and the entity. The argument is that the certain information about the entities that are listed and traded on the exchanges is already available in the public domain.

Sebi is considering the proposal to relax the disclosure norms for rights issues as companies are preferring other modes of raising capital over initial public offer (IPO) in a weak secondary equities market. The market regulator's latest effort is to make rights issues more attractive for the issuers as quite often they choose preferential offers or qualified institutional placements or even American depository receipt (ADR) and Global depository receipts (GDR) issuances over rights issue as these modes require less time, cost and effort.

Sebi has invited comments from the public about the same by 28 March 2009.

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