Listed companies continue to face long wait for SEBI approval of rights offerings

Listed companies seeking the market regulator’s approval for issuing a rights offering continue to face a long wait despite recent efforts from the Securities and Exchange Board of India (SEBI) to address the problem.

On an average, SEBI currently takes between two and three months to approve a company’s proposal for a rights issue. This is an improvement from the waiting period of three to six months a year ago.

“In the last few months, the average time for approval has come down from 120 days to 80 days. But the duration is still too long,” said a merchant banker.

At the regulator’s regional offices, approvals still take more than six months.

“It’s easier to get approvals for an IPO than for a rights issue. It gets more difficult when approval is sought from regional offices,” said a merchant banker on the condition of anonymity.

Foe example, Sumeet Industries filed a draft offer letter with SEBI on July 21 while Shalimar Paints filed a proposal for a rights issue on June 29. Both companies are still awaiting approval.

As of October, 15 companies had announced rights offerings this year, with approvals taking considerable time to materialise.

Infographic (5) (1)

IPOs, too, take time but companies are now getting their DRHPs approved in 45 days, an improvement from 60 days earlier.

Last year, the regulator took 65-70 days on an average to grant approvals. “This year the time-frame has come down to 40-45 days. However, there has been no major change in the timeline for clearing rights issues,” said another merchant banker who did not wish to be named.

According to a source, approving a rights issue is easier since the companies involved are listed and already under the purview of SEBI.

A source working at the regulator said the problem will be resolved soon.

“Earlier, there were complaints of delays in approving IPOs. However, the situation has significantly improved in the last six to seven months.”