SEBI relaxes pricing guidelines and open offer obligations for preferential issues by companies having stressed assets

SEBI identified that the prevailing pricing norms were hindering access to capital for these companies because the price in the preferential issue was to be calculated over a 26-week period. For a company in deteriorating financial condition and falling share prices, this led to a wide gap between the price at the beginning of such period and at the time funds were proposed to be raised. The price at the beginning of the 26-week period would invariably be higher, consequently making it more expensive for any potential investor to participate in a preferential issue by a company having stressed assets.

Accordingly, SEBI proposed certain changes in the pricing framework for companies with stressed assets to make it easier for such companies to access capital markets and invited public comments to such proposed changes. Considering the comments received, SEBI has now introduced a new regulation 164A (Regulation) in the ICDR Regulations for pricing of preferential issues by companies having stressed assets (Stressed Issuer) and consequent amendments to the Takeover Code to exempt such preferential issues.