SEBI amends ICDR regulation; prescribes additional conditions for an offer for sale issue

NOTIFICATION NO. SEBI/LAD-NRO/GN/2022/63 Dated 14-01-2022

SEBI notifies SEBI (ICDR) (Amendment) Regulations, 2022. Amendments are made effective immediately except the amendments made to Reg. 32 (3A), 49,129, 145, clause (10) and (15) of Schedule XIII (Part A) and Schedule XIV which shall come into force from April 1, 2022. Among other amendments, key amendment includes the insertion of new regulation 8A providing additional conditions for an offer for sale for issues under Regulation 6 (2).

Amendment has also been made to Regulation 49 which prescribes allotment procedure and basis of allotment. A new sub-regulation 4A has been inserted providing that the allotment of specified securities to each non-institutional investor shall not be less than the minimum application size, subject to the availability of shares in the non-institutional investors’ category, and the remaining shares, if any, shall be allotted on a proportionate basis in accordance with the conditions specified in this regard in Schedule XIII of these regulations.”

Amendment has been made to Regulation 60 which provides for general conditions, a new sub-regulation 2A has been inserted which provides that the amount for general corporate purposes, and such objects where the issuer company has not identified acquisition or investment target, as mentioned in objects of the issue in the draft offer document and the offer document, shall not exceed 35% of the amount being raised by the issuer subject to riders.

A new regulation 166A has been inserted which prescribes other conditions for pricing, as per new regulation, any preferential issue, which may result in a change in control or allotment of more than 5% of the post issue fully diluted share capital of the issuer, to an allottee or to allottees acting in concert, shall require a valuation report from an independent registered valuer and consider the same for determining the price.

Further, a new regulation 167A has been inserted which prescribes provision relating to the pledging of locked-in specified securities, as per new regulation, specified securities, except SR equity shares, held by the promoters and locked-in under the provisions of these regulations, may be pledged as collateral for a loan granted by a scheduled commercial bank or a public financial institution or a systemically important non-banking finance company or a housing finance company.

Amendment has been made to Regulation 164 which prescribes for pricing for frequently traded shares, now instead of 26 weeks, 90 trading days will be taken as basis period for determination of pricing of frequently traded shares.

Amendment has been made to Regulation 103 which prescribes for eligibility requirements for further public offer, now an issuer shall be eligible to make a further public offer, if it has not changed its name in the last one year period immediately preceding the date of filing the relevant offer document. However if an issuer has changed its name in the last one year period immediately preceding the date of filing the relevant offer document, such an issuer shall make further public offer if at least 50% of the revenue for the preceding one full year has been earned by it from the activity indicated by its new name.

If an issuer not satisfying the above condition then he shall make a further public offer only if the issue is made through the book building process and the issuer undertakes to allot at least 75% of the net offer, to qualified institutional buyers and to refund full subscription money if it fails to make the said minimum allotment to qualified institutional buyers.

Amendment has also been made to Regulation 32 which prescribes for the process of allocation in the net offer. A new sub-regulation 3A has been inserted which provides that the allocation in the non-institutional investors’ category for in an issue made through the book-building process shall be one-third of the portion available to non-institutional investors shall be reserved for applicants with an application size of more than Rs. 2 lakh and up to Rs. 10 lakh; two-third of the portion available to non-institutional investors shall be reserved for applicants with application size of more than Rs. 10 lakh.

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