The Securities and Exchange Board of India (SEBI) issued a circular on March 11, 2025, titled “Faster Rights Issue with a Flexibility of Allotment to Specific Investor(s),” effective from April 7 2025, introducing significant reforms to streamline the rights issue process for listed companies.
💠 Key Highlights of the Circular: 💠
▪️ Expedited Timeline:
Rights issues must be completed within 23 working days from the date the company’s Board of Directors approves the issue, a substantial reduction from the previous average of 317 days.
▪️ Subscription Period:
The rights issue must remain open for a minimum of 7 days and a maximum of 30 days.
▪️ Automated Validation System:
Stock exchanges and depositories are required to develop an automated system for validating application bids within six months from the circular’s applicability date, enhancing the efficiency of the allotment process.
▪️ Filing Requirements:
Companies are no longer required to file a Draft Letter of Offer (DLoF) with SEBI for observations. Instead, they must file it with the stock exchanges to obtain in-principle approval, simplifying the compliance process.
▪️ Flexibility in Allotment:
The circular provides issuers with the flexibility to allot shares to specific investors, allowing promoters to renounce their rights entitlements in favor of particular investors and permitting the issuer to allocate under-subscribed portions to chosen investors.
▪️ Consequential Amendments:
The circular introduces amendments to existing master circulars, clarifying procedures related to disclosures in the Letter of Offer, application forms, bid data correction, and fee payments.
These reforms aim to make rights issues a more attractive and efficient method for companies to raise capital, offering existing shareholders timely opportunities to participate in the company’s growth.
