A new set of guidelines implemented by capital market regulator Sebi condones price relaxation and more flexibility for stressed firms to attract investors, take full advantage of critical fundraising opportunities and limit funding crunches and liquidity. The new guidelines ensure that only two-week pricing is employed for preferential issue by stressed companies - this is effective, as since prices are declining rapidly, the average of 26 weeks is much higher than the average of 2 weeks leading to a colossal difference between the two, and a price misrepresentative of company share values. These regulations are in conformity with IBC guidelines, as they do not allow promoters and promoting groups to participate, and ensures the funds raised will directly benefit the company and are not employed in costs such as loan repayment.
Writer: Insha Hamid
06/07/2020
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