Sebi mulls making rights issues more lucrative for companies to raise money

To make rights issues more lucrative for fundraising purposes, market regulator Securities and Exchange Board of India (Sebi) could do away with the requirement of filing Draft Letter of Offer (DLoF) while rationalising the content of Letter of Offer (LoF).

In a consultation paper released on Tuesday, Sebi has sought suggestions on this while inviting feedback on a host of other issues like reviewing the role of intermediaries involved in the rights issue process, reducing the timelines involved in the process, enabling allotment to selective investors and laying down adequate checks and balances.

Rights issue is one of the ways available to companies to raise capital by issue of shares. The other options are preferential allotments and qualified institutional placements (QIPs).


According to a Sebi data, in FY 2023-24, Rs 15,110 crore were raised via 67 rights issues. In FY23 and FY22, Rs 6,751 crore and Rs 26,327 crore, respectively, were raised via 73 and 43 issues.

The companies were able to raise significantly higher amounts through QIPs and preferential allotment of shares. In FY24, companies garnered 68,972 via QIP route while raising Rs 45,155 crore through preferential allotments.

The issue was placed before the Primary Market Advisory Committee (PMAC) in its meeting held on July 22, 2024, for its consideration and recommendations.

The committee was apprised of the hardships faced by the companies in the rights issue process where it was revealed that the preparation of a detailed DLoF/LoF was a time consuming exercise that resulted in duplication of information, which is already available in the public domain.

Moreover, it usually took approximately 50-60 days in completing the due diligence process and preparation of DLoF/LoF by the MBs, which made the rights issue process lengthy.

The consultation paper also proposed to dispense with the requirement of appointing a merchant banker by an issuer for the rights issue. Instead, the work could be assigned to the issuer, registrar to issue and stock exchanges/ Designated Stock Exchange (DSE).

It is further proposed to reduce the current indicative timelines of rights issue to T+20 working days from the date of board meeting approving rights issue till the date of closure of Rights Issue.

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