Mumbai: The Securities and Exchange Board of India (Sebi) has allowed non-promoter shareholders to contribute towards the shortfall in minimum promoters’ contribution in an initial public offering (IPO) without being identified as a promoter.
Rules mandate at least 20% of promoters’ shares to be locked in for a certain period of time post listing after an IPO.
This relaxation will help new-age technology companies as founders’ shareholding comes down usually after an IPO.
“Looks like SEBI has heard the industry on this point, as this change will benefit companies, especially new age tech companies, where promoters often do not hold majority of the company’s share capital,” said Manshoor Nazki, partner, IndusLaw. “SEBI has also allowed convertibles securities held by promoters for at least a year, to be used for the promoter lock-in.”
Non-promoter shareholders excluding individuals holding more than 5% of the post-offer equity share capital can contribute towards the shortfall, Sebi said.
The promoters will still need to hold at least 10% post-issue.
Rumour verification rules
Sebi has also allowed a key change in the pricing of preferential allotments and qualified institutional placements(QIPs), as part of its new rumour verification framework that comes into effect from June 1 for the top 100 listed entities.
The new rule requires listed companies to verify market rumours upon material price movement.
“The new change in pricing now allows adjustment to the price to exclude material price movement due to market rumours,” said Nazki of IndusLaw.
Lawyers said this move is expected to protect the interests of buyers and sellers in a deal on account of leakage of unpublished information
“It is unfortunately common in India for details of listed company deals to leak prior to its finalisation – resulting in substantial impact (typically, upwards) on the market price,” said Abhishek Dadoo, Partner, Khaitan & Co. “This in turn results in an uptick in the open offer price, which is based on historical market pricing – often impacting the commercial viability of the deal.”
“In this context, the newly introduced price protection framework is a much-needed move. It will effectively isolate the transacting parties from unexpected price volatility on the back of market leaks, and at the same time enable more transparent information flow in the market,” he said.
