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The Securities and Exchange Board of India (SEBI) recently relaxed the pricing methodology for preferential issues by listed companies having stressed assets and exempted allottees of preferential issues from open offer obligations in such cases with immediate effect. In this article, we shall discuss the relaxation for listed companies.
A company whose share is traded on an official stock exchange is regarded as a listed company. It is required to adhere to the listing requirements of that exchange, which shall include how many shares are listed and a minimum earning level. Listed companies are owned by many shareholders. The shareholders are entitled to two forms of return by investing in a listed company. They are dividend and capital gains.
According to SEBI, the framework will help stressed companies to raise capital through timely financial intervention, and it will also protect the interests of the shareholders. The regulator has earlier also taken the decision to relax many laws amidst the Covid-19 pandemic. These relaxations are essential considering the entire nation was under lockdown which restricted a lot of activities.
The relaxation for listed companies from SEBI includes the following:
A listed company meeting any two out of the following three conditions will be considered as stressed and hence shall be eligible under relaxation for listed companies:
To avail the relaxation for listed companies, the eligible listed companies are required to adhere to the following conditions:
Usually listed companies having stressed assets may have a progressive fall in their share price. Moreover, the disclosure that is made by the stressed companies such as their financial results and default in servicing debts also aggravates the fall. Such firms face difficulty in raising capital through traditional means. Therefore, the Securities and Exchange Board of India (SEBI[1]) eased the pricing methodology of preferential issues by such firm.
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