Securities Exchange Board of India (SEBI) on Tuesday, 11 March 2025, slashed the rights issue timeline to 23 days in order to make rights issue the most sought-after route for fundraising by the Indian businesses. Along with this big announcement, the market regulator has announced certain other rules and framework to improve the fundraising activity for the corporates and primarily to enhance the ease of doing business in India.

Rights Issue under New Framework 

Under the new framework announced by SEBI, the rights issues have to be completed within 23 days. The counting of days will begin from the date of approval of the rights issue by the board of directors. Currently, the average days required for completion of rights issue is around 317 days. Once this new framework is implemented, rights issue will be even faster than the preferential allotment route which of around 40 working days. 

The minimum period for subscribing to the rights issue will be seven days, while the maximum will be 30 days as announced by SEBI in the same circular. The regulator has also announced that with this new framework, the existing shareholders of the company issuing the rights, will get to participate in the future of the company’s potential growth.

Other Announcements by SEBI

• In separate circulars, SEBI announced that the issuer of the rights needs to file a draft letter of the offer with the stock exchanges. 
• SEBI has asked the depositories and stock exchanges in India to develop an automated validation system to validate the applications. SEBI has given six months for the same. 
• The market regulator also simplified the content that will be going in the Letter of Offer. It should only have relevant additional information related to the rights issue such as –
  • Purpose of the rights issue
  • Record date 
  • Entitlement ratio
  • Price
• SEBI has removed the compulsion on appointing a merchant banker by the issuer for the rights issue. It is now optional for the issuer subject to the completion of rights issue within the 23 days’ timeline.  
• On the other hand, the stock market regulator has made it mandatory to appoint a ‘monitoring agency’ for supervising the use of the proceeds raised from rights issue of equity shares. Presently, it wasn’t mandatory for the issuers who offered securities worth less than ₹500 crore via rights issue. 
• SEBI also announced that the issuer needs to disclose to stock exchanges about any specific investor. These investors need to apply on the first day of the issue, within 11 A.M., and the stock exchanges must be informed by 11:30 A.M. 

Wrapping up 

With this new framework by SEBI for rights issue, it is expected that for fundraising, rights issue will become one of the preferred choices with the reduced rights issue processing time. It will also ease the process of rights issue, and fast-track it, and in turn increase the ease of doing business in the country. 

Source: TheTimesofIndia

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