What are the key changes that SEBI proposes on preferential allotments?

There are several interesting changes coming up with reference private placement of preferential shares, warrants and convertibles. Here is a gist.

· First and foremost, the pricing of these preferential offers would now be based on the higher of 10-day VWAP and 60-day VWAP price. The current 26-week history for calculating average and is not exactly reflective of the latest developments.

· SEBI has also stipulated that any preferential issue that results in effective change of control or entails over 5% stake, must be mandatorily valued by an independent registered valuer. This has been triggered by the PNB / Carlyle dispute.

· Finally, there is some respite for preferential lock-ins. For promoters, the preferential lock-in will be reduced from 3 years to 18 months. For non-promoter allottees, the lock-in period will be reduced from 1 year to just 6 months.