The Securities and Exchange Board of India (Sebi) has lowered the time frame for completing rights offerings from 126 to 23 days. This will enable corporations to raise cash more quickly through rights issues, as opposed to preferential offers, which require 40 days. The new rule would go into force on April 7, 2025.

In addition, the regulator has allowed specific investors in the rights offering to be allocated differently.

Sebi issued a circular on Tuesday outlining new timetables for completing the different actions involved in the rights issue process, from the date the issuer’s board of directors approves it until the date the issue is closed.

Sebi stated that rights issues will be open for subscription for a minimum of seven days and a maximum of 30 days.
In a second notification, Sebi stated that “the issuer shall file the draft letter of offer with the stock exchange(s)”.

The exchanges and depositories have been required to build a system for automated application assessment within six months. Furthermore, Sebi has rationalized the language of the Letter of Offer to provide just the important additional information regarding the rights issue — object of issue, price, record date, entitlement ratio, among others. It removed the requirement that an issuer appoint a merchant banker and making it optional subject to completion of rights issue within the timeline of 23 working days.

Currently, an issuer offering securities worth less than Rs 50 crore through a rights issue does not need to hire a monitoring agency.

It further stated that the stock exchanges and depositories, in collaboration with the issue’s registrar, will validate application bids received for subscribing to shares in the rights issue and finalize the basis of allotment.

This process would be even faster than the preferential allotment procedure, which requires 40 working days.