SEBI introduces revised norms to regulate Indian capital markets

The SEBI Board on Feberuary 2, 2009 has announced various measures to regulate markets:

(i) Listed companies to declare dividend on per share basis only

It has been decided to amend the listing agreement to provide that listed entities shall declare dividend on per-share basis only. At present, there is no uniformity in declaring dividend. Some companies declare dividend on per share basis and some as a percentage of face value of the shares. Declaration of dividend as a percentage of face value has the potential to mislead the investors in case face values of the shares of two companies are different.

(ii) Timelines for bonus issues reduced

It has been decided to reduce the period for completing a bonus issue to 15 days, where no shareholders’ approval is required as per articles of association of the company and to 60 days where shareholders’ approval is required as per Articles of Association of the company. At present, in terms of the DIP Guidelines, listed companies are required to complete a bonus issue within a maximum period of six months from the date of approval of the issue by the Board of the company.

(iii) Time frame for announcing the price band for Initial Public Offering (IPO) shortened

It has been decided to amend the DIP Guidelines to enable the issuer company making an IPO to declare the floor price/ price band at least two working days before the date of opening of IPO subject to wide dissemination of price band through newspaper advertisements, availability in websites etc. The issue advertisements shall also disclose the financial ratios calculated for both upper and lower end of the price band. At present, in terms of the DIP Guidelines, in case of an IPO, either the floor price or the price band is required to be disclosed in the Red Herring Prospectus (RHP) i.e. about two weeks before the date of opening of the IPO.

(iv) Review of preferential allotment guidelines for warrants :

It has been decided to amend the DIP Guidelines to increase the upfront margin to be paid by allottees of warrants to 25%. At present, in terms of DIP Guidelines, the allottees of warrants are required to pay a margin of 10% as upfront payment at the time of allotment.

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