InvestorQ : What are the major changes that SEBI is proposing to its preferential allotment norms?
Riya Dwivedi made post

What are the major changes that SEBI is proposing to its preferential allotment norms?

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shrinidhi Rajan answered.
6 months ago
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Here are some of the major changes to the preferential norms that SEBI is planning?

· This will cover the framework governing preferential allotments of shares, warrants or convertibles to promoters and large investors on privately-placed basis.

· The gist is to redraw the contours of the pricing formula, the lock-in requirements as well as the valuation methodology deployed for preferential issues.

· Regarding pricing, the new formula by SEBI will peg the preferential allotment price at the higher of VWAP of 60 trading days and VWAP of 10 trading days. This was after representations that 26 weeks was too long a period to give a good picture of price.

· SEBI will also insist that any preferential issue resulting in change in control or allotment of more than 5% stake will require independent valuation report. This is in the light of the controversy stoked by the PNB Carlyle placement issue. In case of change in control, the valuation report will also have to provide a framework for control premium.

· In an important step, the lock-in will be reduced from 3 years to just 18 months for promoters and from 1 year to 6 months in case of non-promoters.

Finally, SEBI has also permitted preferential issue for consideration other than cash, like for example; shares swap.
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