NEW DELHI: Companies may soon be able to raise funds through rights offerings considerably faster, with the process becoming shorter than the one for initial public offerings (IPOs). Capital market regulator SEBI is working on a proposal to keep the rights issue process short and simple. SEBI has told its Primary Markets Advisory Committee (PMAC) to examine the proposal to reduce the time taken for raising funds through this route, according to sources close to the development.
Recently, SEBI announced that the timeline for a rights issue was being reduced from 109 days to 43 days. What SEBI has in mind now is a further crunching of the process of rights offer - both pre- and post-issue, as it is made to its existing shareholders. The market regulator is currently trying to shorten the IPO process, post closing to 7-8 days from the existing 21 days. The regulator is also keen to replicate the electronic process of payment and allotment in case of rights offers. The aim is to crunch the time-line for a rights issue to less than the time taken for an IPO. The SEBI move is primarily aimed at making the process attractive enough for corporates and to discourage them from taking the easy route of private placements. The concept of a small declaration instead of a prospectus with detailed disclosures, which will outline what an issuer plans to do with the funds raised through a rights issue, could be considered, said a person associated with the exercise. The rationale for the move is that since the offer only has to be made to the existing shareholders, the company does not need to provide details which it would have given in its prospectus at the time of initial public offer and later in the form of annual reports. All it needs to do is to inform its existing shareholders about its plan for utilisation of funds. The rights issue involves a long-drawn process - anywhere about 3-5 months, including the time taken to prepare the offer document, and also because the issue itself is open for a month. "Having simplified the IPO process, there is now a need to take a relook at the rights issuance norms to make it easier for companies to raise money from their own shareholders," says Prithvi Haldea, managing director, Prime Database. In a rights offering, a listed company proposes to issue fresh securities to its existing shareholders whose names appear on the records on a date fixed by the company, known as the record date. The rights are normally offered in a particular ratio to the number of securities held prior to the issue. The rights issue route is best suited for companies which seek to raise capital without diluting the stake of its existing shareholders unless they do not intend to subscribe to their entitlements. Rights issue as a fund-raising route is making a comeback after remaining dormant for over a decade. With the primary market in doldrums, companies are finding it hard to raise funds from the market. Now, they are turning to existing investors for funds through rights issue. There is a sharp increase in number of applications filed with SEBI for rights issues. In fact, in 2007, domestic companies mobilised Rs 14,085 crore through rights issue. This includes leading corporate houses like the Tatas and the Birlas. And now, even many mid and small companies are taking this route for fund mobilisation. Even promoters prefer this route because they could raise funds without diluting their stakes. And the feeling among the regulatory circle is that in this route at least promoters are putting their funds in the company, unlike in a follow-on issue. Indian companies raised over Rs 14,085 crore through various rights issues in 2007, marking the highest-ever mop-up in a single year, and almost four times more than in 2006. The rights issue of Tata Steel accounted for a significant chunk of the total mobilisation in 2007, helping the year surpass 1992-levels when companies raised Rs 11,311.92 crore through 468 rights issues. Tatas' mega issue The Tata Group company had announced a mega rights issue of about Rs 9,134 crore in November 2007 to repay the 'bridge loans' raised for funding acquisition of British steel behemoth, Corus. Federal Bank, which raised close to Rs 2,141 crore; Hindustan Oil Exploration, Rs 610.95 crore; GTL Infrastructure, Rs 336.4 crore; and ITD Cementation India, Rs 244.72 crore completed the list of the top issues of 2007. The 2006 list of the largest rights issue included Aditya Birla Nuvo, Bajaj Auto Finance, Tata Teleservices Maharashtra and Tata Coffee, among others http://economictimes.indiatimes.com/SEBI_set_to_put_rights_issues_on_fast_track/rssarticleshow/3460687.cms ekamber The greatest lesson in life is to know that even fools are right sometimes. ---Churchill --~--~---------~--~----~------------~-------~--~----~ You received this message because you are subscribed to the Google Groups "Kences1" group. To post to this group, send email to [email protected] To unsubscribe from this group, send email to [EMAIL PROTECTED] For more options, visit this group at http://groups.google.com/group/kences1?hl=en -~----------~----~----~----~------~----~------~--~---
