Post-Ruchi Soya, Sebi rethinks exemptions given to listed CIRP companies
Sebi tightens norms on public shareholding for CIRP cos
The unexpected surge in Ruchi Soya share prices post-acquisition by Patanjali Ayurveda Ltd has forced the Securities and Exchange Board of India (Sebi) to relook at the exemptions given to listed companies acquired by new investors through the insolvency proceedings.
The Sebi has earlier given listed companies whose public shareholding fell below 10% post-CIRP 18 months to bring public shareholding to 10% and three years to bring it to 25%.
However, after the Ruhi Soya case, where the public shareholding fell below 1% post-CIRP and due to low float prices of the scrip surged 8,800%, the market regulator is now contemplating various options to prevent such occurrences in future.
Sebi’s Primary Market Advisory Committee has proposed many measures including rolling back some of the exemptions given to CIRP companies. For example, the advisory committee now proposes a shorter time period of six months to bring public shareholding to 10% against the existing 18 months.
It also proposes that post-CIRP companies may be asked to have at least 5% public shareholding, and then they would be given 12 months time to bring public shareholding to 10% and another 24 months to achieve 25% public shareholding.
In another proposal, it says that post-CIRP companies must have 10% public shareholding at the time of relisting.
The committee has also recommended freeing the preference shares allotted to incoming investors or promoters from the current one-year lock-in requirement so that the company does not face problems in increasing its public shareholding.
The Sebi now also moots to introduce a standardized reporting framework pursuant to approval of the resolution plan.
Some of these disclosures could be pre- and post net-worth of the company, detailed pre and post shareholding pattern, details of funds infused, creditors paid-off, names of the new promoters, key managerial persons(s), etc.
The Sebi may seek public comments on these proposals and recommendations before implementing the same.
