SEBI on recently proposed relaxing pricing norms and lock-in requirements to make it easier for companies to raise funds through preferential allotment of shares. In addition, the regulator has proposed allowing pledging of shares allotted to promoter or promoter group under preferential issue during the lock-in period. The pricing formula for allotment of shares under preferential issue should be the Volume-Weighted Average Price (VWAP)of weekly highs and lows for 60 trading days or 10 trading days, whichever is higher, the watchdog said in a consultation paper. At present, the pricing formula in a preferential allotment is the VWAP of the last two weeks or the last 26 weeks, whichever is higher.

 

Moreover, any preferential issue allotment resulting in change in control should be done following a reasoned recommendation from a committee of independent directors, according to Sebi. The consultation paper also comes against the backdrop of PNB Housing Finance's proposed allotment of preference shares to US-based Carlyle Group and a clutch of other investors hitting a roadblock. Sebi had questioned PNB Housing Finance’s rationale behind the fixing of the issue price, among other aspects, in that deal which was later shelved. In the wake of the coronavirus pandemic, a temporary relaxation with respect to pricing was allowed.