Mar 31, 2022

SEBI (Issue of Capital and Disclosure Requirements) (Amendment) Regulations, 2022

SEBI, pursuant to Notification dated January 14, 2022, notified amendments to the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018, (‘SEBI ICDR Regulations’). Following are certain key amendments:

Sr. No. Particulars Pre – SEBI (Issue of Capital and Disclosure Requirements) (Amendment) Regulations, 2022 Post – SEBI (Issue of Capital and Disclosure Requirements) (Amendment) Regulations, 2022
1. Limitations for Object of the Issue ·  Issuer companies did not have to specify how much of the raised funds would be identified for acquisitions, and/or for routine investments. ·  If the issuer company, in its offer document, sets out an object for future inorganic growth, but has not identified the acquisition or investment target, the amount for such objects and the amount for general corporate purposes, must not exceed 35% of the total amount being raised.[1]

·  If the issuer company has not identified any acquisition or investment target, the amount raised for such objects must not exceed 25%.[2]

2. Conditions for Offer for Sale by Selling Shareholders There were no restrictions on the sale of shares by existing shareholders of an issuer company. For issues where draft offer document is filed under Regulation 6(2) of the SEBI ICDR Regulations:

·  Existing shareholders with more than 20% of the pre-issue shareholding cannot offer more than 50% of their pre-issue shareholding in an initial public offer (‘IPO’).

·  Further, those holding less than 20% of pre-issue shareholding cannot offer more than 10% of the share capital of the issuer.

3. Reporting on Utilisation of Issue Proceeds ·  Credit rating agencies could not act as monitoring agencies. Only scheduled commercial banks named in the offer documents as bankers to the issuer and public financial institutions were permitted to act as monitoring agencies.

·  Monitoring was done till 95% utilisation of issue proceeds excluding the amount raised for general corporate purposes.

·  Only credit rating agencies can now act as monitoring agencies.

·  Monitoring will be done till 100% utilisation of issue proceeds including the amount raised for general corporate purposes.

4. Price Band ·  The cap on the price band was required to be less than or equal to 120% of the floor price. ·  The cap of the price band must be at least 105% of the floor price, for all issues opening on or after January 14, 2022.
5. Lock-in for Anchor Investors ·  The lock-in period for anchor investor was 30 days. ·  There must be lock-in for anchor investors for a period of 90 days from the date of allotment for 50% of the shares allocated to the anchor investors.[3]

·  For the remaining 50% it must continue to be 30 days from the date of allotment.

6. Lock-in Provisions for Preferential Issue For Promoters or Promoter Group:

·  The lock-in requirement for allotment of up to 20% of the post issue paid-up was for three years.

·  The lock-in requirement for allotment exceeding 20% of the post issue paid-up capital was for one year.

For Persons other than Promoters or Promoter Group:

·  The lock-in requirement for allotments were for one year.

For Promoters or Promoter Group:

·  The lock-in requirement for allotment of up to 20% of the post issue paid-up capital is reduced to 18 months.

·  The lock-in requirement for allotment exceeding 20% of the post issue paid-up capital is reduced to six months.

For Persons other than Promoters or Promoter Group:

·  The lock-in requirement for allotments are reduced to six months.

7. Revised Allocation Methodology for Non-Institutional Investors (‘NIIs’)[4] ·  NII allotment was done on a proportionate basis ·  One third of the portion available to NIIs will be reserved for applicants with application size of more than ₹ 0.2 million (approx. US$ 2,612) and up to ₹ 1 million (approx. US$ 13,060).

·  Two-thirds of the portion available to NIIs will be reserved for applicants with application size of more than ₹ 1 million (approx. US$ 13,060).

·  Allotment of securities in case of NII category will be on ‘draw of lots’, as is currently applicable for retail individual investors category.

 

[1] These limits will not apply if the proposed acquisition or strategic investment object has been identified and duly disclosed in the offer documents.

[2] Ibid.

[3] This will come into effect for all issues opening on or from April 1, 2022.

[4] Ibid.

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