Sebi eases norms for IDRs, fast track issues

Minimum application value in IDR cut from Rs 2,00,000 to Rs 20,000

Securities & Exchange Board of India (Sebi) today, 29 November 2007, issued eligibility norms for fast track follow-on public offerings (FPO)and rights issues. Sebi Disclosure and Investors Protection (DIP) guidelines presently enable a listed company, which satisfies certain specified requirements, to prepare a draft offer document containing rationalised disclosures, as against comprehensive disclosures for an IPO. The draft offer document is, however, processed by Sebi and stock exchanges in a manner similar to that of a draft IPO document.

However, according to Sebi, such companies can now proceed with follow-on public offering/rights issue by filing a copy of the Red Herring Prospectus (in case of book built issue)/Prospectus (in case of fixed price issue) registered with the Registrar of Companies or the letter of offer filed with designated stock exchange, with Sebi and stock exchanges.

The market regulator has also eased guidelines on issue of Indian Depository Receipts (IDRs). Presently, Sebi (DIP) guidelines provide that only qualified institutional buyers (QIBs) can apply in an IPO of IDRs. But following the latest amendments, all categories of investors to apply in IDR issues, subject to at least 50% of the issue being subscribed by QIBs, and the balance being made available for subscription to other categories of investors at the discretion of the issuer.

Sebi has also reduced the minimum application value in IDR from Rs 2,00,000 to Rs 20,000.

Sebi has also made income tax permanent account number (PAN) mandatory in public and rights issue. Until now, PAN was mandatory for application value exceeding Rs. 50,000.

The market regulator has also said that a company can issue shares to retail investors and retail shareholders provided the discount does not exceed 10% of the price at which shares are issued to other categories of public