To enable companies increase their minimum public shareholding, to comply with Securities Contracts Regulation (Rules) 1957, stock market regulator SEBI introduced two new methods on Tuesday.
Companies may now increase minimum public shareholding either through a fresh issue of capital or an offer for sale by promoters to qualified institutional buyers.
A maximum of 10 per cent or such lesser percentage required for compliance of minimum public shareholding is being allowed to be raised through the institutional placement route.
The red herring prospectus would be filed simultaneously with SEBI, Registrar of Companies and stock exchanges.
A minimum of 25 per cent of the issue has been earmarked for mutual funds and insurance companies.
The floor price or price band shall be announced a day prior to the issue opening and exchanges shall display the aggregate demand schedule, said SEBI.
There should be a minimum of 10 allottees and a single investor would not be allotted more than 25 per cent of the offer size said SEBI.
Allotment would be made on price priority, proportionate or on pre-specified criteria that would be disclosed in advance and cannot be subsequently changed.
Offer for sale
SEBI also introduced offer for sale of shares through stock exchanges. This would be possible through a separate window on the exchange during normal market hours.
In this case, the minimum offer would be for one per cent of paid-up capital subject to a minimum of Rs 25 crore.
Only promoters would be allowed to offer their share for sale and they would not be permitted to bid for these shares, said SEBI.
SEBI has prescribed a 100 per cent upfront cash margin for these bids to eliminate settlement hassles. Settlement would be through the exchange clearing mechanism.
Allotment would either be on price priority or clearing price basis proportionately, overseen by the exchanges.
This method can be used by promoters of top 100 companies (based on average market capitalisation) for sale of their stake, said SEBI.
SEBI also amended the tender offer method to enhance the efficiency of the buyback process.
Record date
Companies shall announce the ratio of buyback and fix a record date to determine entitlements of shareholders akin to a rights issue said SEBI.
Acceptance of shares would first be according to entitlement. If any shares are still left to be bought back acceptance of additional shares tendered over and above the entitlement shall be in proportion to the excess shares tendered by the shareholder, said SEBI.
SEBI has directed companies to fix a record date instead of specified date and said that the public announcement of buyback shall be made within two working days of the board or shareholder resolution.
SEBI has also revised timelines of various activities of the buyback process so that time for completion will reduce substantially.