As per the listing agreement, currently the issuer company can adopt the following methods to achieve the minimum level of public shareholding for the purpose of compliance with SCRR:
a. issuance of shares to public through prospectus; or
b. offer for sale of shares held by promoters to public through prospectus; or
c. sale of shares held by promoters through the secondary market.
For the purpose of adopting method specified at (c) above, the issuer company shall take prior approval of the Stock Exchange.
The minimum level of Public shareholding as specified in Rule 19A of SCRR for continuous listing is as under:
In case of every company other than public sector company - at least 25%.
In case of public sector company - at least 10%.
SEBI has approved the following 2 additional methods viz. Institutional Placement Programme (IPP) and Offer for Sale of Shares through the stock exchange for increasing the minimum public shareholding. The broad features of these additional methods are as under:
A. Institutional Placement Program (IPP):
a. This method can be used either by way of fresh issue of capital or dilution by the promoters through an offer for sale. Under this method, public shareholding can be increased by 10% or such lesser percentage as is required to comply with the minimum public shareholding requirement.
b. Offer would be made only to Qualified Institutional Buyers (QIBs) with reservation of minimum 25% to mutual funds and insurance companies.
c. There shall be at least 10 allottees in every IPP issuance. No single investor shall receive allotment for more than 25% of the offer size.
d. The allotment of shares may be made on price priority, proportionate or on pre- specified criteria which has to be disclosed in advance in the prospectus and cannot be changed subsequently.
B. Offer for sale of shares through stock exchanges:
a. Stock exchange would offer a separate window for the purpose of such sales, the duration of which would co- exist with the normal trading hours.
b. Offer shall be for at least 1% of the paid-up capital of the company, subject to a minimum of ` 250 million.
c. Only the promoter / promoter group of companies which are active / eligible for trading would be permitted to offer their shares for sale. Promoter/ promoter group of the company would not be permitted to bid for the shares.
d. Every bid / buy orders would be required to be backed by 100% upfront cash margin. The settlement shall be through exchange clearing mechanism.
e. Allotment would be done either on price priority or clearing price basis proportionately and would be overseen by the exchanges.
This method can also be used by promoter of top 100 companies (based on average market capitalization) for sale of their stake.
Amendment to SEBI (Buyback of Securities) Regulations, 1998
The highlights of changes approved by SEBI in tender offer method of buyback are as under:
Procedure for acceptance of shares in buyback through tender offer
The company shall announce ratio of buyback as is done in the case of rights issues and fix a record date for determination of entitlements as per shareholding on record date. While the shareholders are free to tender over and above their entitlement, acceptance of shares shall first be based on entitlement of each shareholder and if any shares are still left to be bought back, acceptance of additional shares tendered over and above the entitlement shall be in proportion to the excess shares tendered by the shareholder.
“Record date” in lieu of specified date
The company shall fix “record date” for the purpose of deciding entitlement for buyback, as per the practice followed for other corporate actions as laid down in listing agreement.
Review of requirement of issuing Public Notice and Public Announcement
Public Announcement shall be published within two working days from the date of Board or Shareholders resolution, as the case may be.
Rationalisation of timelines in buyback through tender offer
The timelines for various activities involved in the buyback process have been revised which shall result in substantial reduction of time taken for completion of buyback.
Conclusion
SEBI press release only provides summary of changes announced by SEBI and one will have to see the fine print of the amendments to be notified.
a. issuance of shares to public through prospectus; or
b. offer for sale of shares held by promoters to public through prospectus; or
c. sale of shares held by promoters through the secondary market.
For the purpose of adopting method specified at (c) above, the issuer company shall take prior approval of the Stock Exchange.
The minimum level of Public shareholding as specified in Rule 19A of SCRR for continuous listing is as under:
In case of every company other than public sector company - at least 25%.
In case of public sector company - at least 10%.
SEBI has approved the following 2 additional methods viz. Institutional Placement Programme (IPP) and Offer for Sale of Shares through the stock exchange for increasing the minimum public shareholding. The broad features of these additional methods are as under:
A. Institutional Placement Program (IPP):
a. This method can be used either by way of fresh issue of capital or dilution by the promoters through an offer for sale. Under this method, public shareholding can be increased by 10% or such lesser percentage as is required to comply with the minimum public shareholding requirement.
b. Offer would be made only to Qualified Institutional Buyers (QIBs) with reservation of minimum 25% to mutual funds and insurance companies.
c. There shall be at least 10 allottees in every IPP issuance. No single investor shall receive allotment for more than 25% of the offer size.
d. The allotment of shares may be made on price priority, proportionate or on pre- specified criteria which has to be disclosed in advance in the prospectus and cannot be changed subsequently.
B. Offer for sale of shares through stock exchanges:
a. Stock exchange would offer a separate window for the purpose of such sales, the duration of which would co- exist with the normal trading hours.
b. Offer shall be for at least 1% of the paid-up capital of the company, subject to a minimum of ` 250 million.
c. Only the promoter / promoter group of companies which are active / eligible for trading would be permitted to offer their shares for sale. Promoter/ promoter group of the company would not be permitted to bid for the shares.
d. Every bid / buy orders would be required to be backed by 100% upfront cash margin. The settlement shall be through exchange clearing mechanism.
e. Allotment would be done either on price priority or clearing price basis proportionately and would be overseen by the exchanges.
This method can also be used by promoter of top 100 companies (based on average market capitalization) for sale of their stake.
Amendment to SEBI (Buyback of Securities) Regulations, 1998
The highlights of changes approved by SEBI in tender offer method of buyback are as under:
Procedure for acceptance of shares in buyback through tender offer
The company shall announce ratio of buyback as is done in the case of rights issues and fix a record date for determination of entitlements as per shareholding on record date. While the shareholders are free to tender over and above their entitlement, acceptance of shares shall first be based on entitlement of each shareholder and if any shares are still left to be bought back, acceptance of additional shares tendered over and above the entitlement shall be in proportion to the excess shares tendered by the shareholder.
“Record date” in lieu of specified date
The company shall fix “record date” for the purpose of deciding entitlement for buyback, as per the practice followed for other corporate actions as laid down in listing agreement.
Review of requirement of issuing Public Notice and Public Announcement
Public Announcement shall be published within two working days from the date of Board or Shareholders resolution, as the case may be.
Rationalisation of timelines in buyback through tender offer
The timelines for various activities involved in the buyback process have been revised which shall result in substantial reduction of time taken for completion of buyback.
Conclusion
SEBI press release only provides summary of changes announced by SEBI and one will have to see the fine print of the amendments to be notified.
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