Prop for promoter
Mumbai, June 26: The Securities and Exchange Board of India (Sebi) today relaxed rules for promoters planning to reduce their stake in companies through an open offer of shares to institutional investors over the stock exchanges.
It also made electronic voting mandatory for the top 500 companies that have until now secured shareholder approvals on certain resolutions through the cumbersome postal ballot route.
Analysts said the decisions taken were designed to remove procedural hurdles to enable listed companies to comply with Sebi’s minimum public shareholding requirements.
Private companies must have a minimum public shareholding of 25 per cent by June next year. PSUs will need to have a minimum 10 per cent public float by next August.
The market regulator made some changes in rules relating to the offer for sale (OFS) and institutional placement programme (IPP). These new mechanisms that use the auction route will save both time and costs for companies as they won’t have to go through the entire process of a follow-on public offer.
The market regulator had received several representations saying that some requirements did not make the new mechanism attractive. For instance, there has to be a 12-week gap between two IPPs or OFS. Another major irritant was that institutional investors had to pay an upfront margin of 100 per cent. ONGC, Wipro and Godrej Properties are some of the companies that have used this route this year.
Sebi has now said that within the cooling off period of 12 weeks, the promoter/promoter group entities can offer their shares only through OFS or IPP while maintaining a gap of two weeks between two successive OFSs or IPPs.
The capital market regulator also said that the minimum size of the issue could be lower than the current level of Rs 24 crore so as to achieve minimum public shareholding in a single tranche.
Institutional investors will have the choice to either pay a 100 per cent upfront margin in cash or an ad hoc margin at a lower percentage which can be determined by the stock exchanges. However, in the case of paying the ad-hoc margin, investors will not be permitted to revise their bids.
The market regulator stipulated that all listed companies would have to go for electronic voting in respect of those matters shareholder approval is sought through a postal ballot. E-voting will be mandatory for the top 500 listed companies on the BSE and the NSE based on market cap.
Sebi has also asked listed companies to file annual audit reports to stock exchanges under two separate forms: qualified and unqualified.
In accounting parlance, if auditors highlight the non-compliance of certain provisions or accounting standards by the company, it is called a qualified report.
After a preliminary scrutiny, the stock exchanges will refer these reports to it. The market regulator will also create a qualified audit report review committee represented by the Institute of Chartered Accountants of India (ICAI), stock exchanges to guide the regulator in processing audit reports where qualifications have been made.
Sebi said that in cases where the qualifications were significant and the explanation given by the company wasn’t satisfactory, the issue would be referred to the financial reporting board of the ICAI.