In a Circular dated 1st July, 2020 the Securities and Exchange Board of India (“SEBI”) has rolled out the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) (Third Amendment) Regulations, 2020 (“Amendment Regulations”) in order to further amend the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018 (“Principal Regulations”).
The Amendment Regulations will become effective on the date of their publication in the Official Gazette.
The Amendment Regulations insert a new provision “Regulation 164 B” which deals with “Optional pricing in preferential issue”.
Key Highlights:
1. In case of frequently traded shares, the price of the equity shares to be allotted pursuant to the preferential issue must be determined by regulation 164 or regulation 164B, as opted for.
2. The price of the equity shares to be allotted pursuant to the preferential issue must not be less than the higher of the following:
• the average of the weekly high and low of the volume weighted average price of the related equity shares quoted on the recognised stock exchange during the twelve weeks preceding the relevant date.
• the average of the weekly high and low of the volume weighted average prices of the related equity shares quoted on a recognised stock exchange during the two weeks preceding the relevant date.
• Specified securities allotted on a preferential basis using the pricing method determined under will be locked-in for a period of three years.
• The pricing method determined will be availed in case of allotment by preferential issue made between 1st July, 2020 or from the date of notification of this regulation, whichever is later and December 31, 2020.
• All allotments arising out of the same shareholders approval shall follow the same pricing method.
Source: Securities and Exchange Board of India
