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The regulator felt the need for simplifying the norms for
rights offer, as the companies were resorting to other modes
for raising capital. The SEBI board which met on June 18,
2009 had noted that quite often, the issuers choose
preferential offers or qualified institutional placements' or
even American or global depository receipt issuances over
rights offers, as these modes require less time, cost and
efforts.
“It has been decided to amend Clause 8.19 of the Sebi DIP
Guidelines to provide that the issuer company can utilise the
issue proceeds only after the basis of allotment is finalised,”
Sebi said in a circular.
Rights issues are further issuances of capital made by listed
companies to existing shareholders. The market regulator
had earlier simplified disclosure norms for such issues since
the issue is by listed companies and existing shareholders
are familiar with the entity.