The informal guidance by way of ‘interpretive letter’ was issued by SEBI with respect to the provisions of the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 (‘SEBI ICDR Regulations’).
Dhanlaxmi Bank Limited (‘Bank’) is a listed company and a duly incorporated Scheduled Commercial Bank. The Bank is a professionally managed listed company without any identifiable promoter or promoter group. The Bank is proposing to raise capital through a rights issue under the SEBI ICDR Regulations. The objects of the rights issue is augmentation of Tier I capital base and not meant for financing of capital expenditure for a project.
In light of the above, informal guidance in the form of an ‘interpretive letter’ has been sought, seeking clarifications on whether any relaxation is available to a professionally managed listed company in India without any identifiable promoter/promoter group (in this case a private sector scheduled commercial bank) proposing a rights issue with respect to minimum subscription requirement under Regulation 86 of the SEBI ICDR Regulations.
In response, the following comments were provided by SEBI:
i. SEBI reproduced below Regulation 86(1) of the SEBI ICDR Regulations, which deals with the minimum subscription in a rights issue:
“(1) The minimum subscription to be received in the issue shall be at least ninety percent of the offer through the offer document.
Provided that minimum subscription criteria shall not be applicable to an issuer if
(a)the object of the issue involves financing other than financing of capital expenditure for a project; and
(b)the promoters and the promoter group of the issuer undertake to subscribe fully to their portion of rights entitlement and do not renounce their rights except to the extent of renunciation within the promoter group.”
ii. For an exemption from the minimum subscription requirement under Regulation 86 of the SEBI ICDR Regulations, the twin conditions of the proviso to the aforesaid Regulation are required to be met. However, for a professionally managed listed company without an identifiable promoters/promoter group, compliance with the second condition (b) to the proviso to Regulation 86(1) of SEBI ICDR Regulations is not possible. In such case, compliance with the first condition (a) of the aforesaid proviso will be considered as sufficient compliance for getting an exemption from the minimum subscription requirement under a rights issue.