Context: As per a gazette notification, SEBI has allowed companies to make two qualified institutional placements (QIPs) with a gap of just two weeks between them.
Key Points

• It is a part of SEBI’s attempts to make it easier for listed companies to raise funds in the current volatile scenario.
• This allows listed companies to raise funds at shorter intervals while also giving promoters the go-ahead to increase their stakes by a higher quantum without triggering an open offer.
• This is a significant move as the earlier regulations mandated a minimum gap of six months between two such issuances.
• In another important amendment, the regulator has said that promoters can increase their stakes in their companies through preferential allotments by up to 10% without triggering an open offer.
• The cap was earlier set at 5% and the relaxation is only for the current financial year.
• In April 2020, SEBI had relaxed certain regulatory requirements related to rights issues and initial public offerings (IPOs) to make it easier for companies to raise funds at a time when the COVID-19 pandemic had made the secondary markets increasingly volatile.
• It had said that any listed entity with a market capitalisation of at least Rs 100 crore could use the fast- track route for a rights issue. (Earlier, the norm was Rs 250 crore for such offerings.)
• Further, any company that had been listed for 18 months was permitted to raise funds through a fast- track rights issue. (The eligibility had earlier been set at three years.)
• Also, the minimum subscription requirement to make an issue successful was lowered from the earlier 90% of the offer size to 75%.

Significance of this move

• The recently announced measures along with the relaxation on rights issues, permitted earlier, are aimed at increasing liquidity for Indian companies.
• Analysts opine that the twin moves would help in enhancing liquidity in the market.
• The companies would be able to time fund-raising in a better manner.
• Promoters can also acquire shares at a time when valuations were quite low compared with the historic highs.

What is preferential issue?

• A preferential issue is a primary market issuance of shares by listed companies to selected institutions or institutional buyers.
• It is a sale of shares or convertible securities by listed or unlisted companies to a select group of investors and considered to be the fastest way of raising capital.

About SEBI

• The Securities and Exchange Board of India (SEBI) is the regulator of the securities and commodity market in India owned by the Government of India.
• SEBI was established in 1988 and given Statutory Powers on 30 January 1992 through the SEBI Act, 1992.

For the discharge of its functions efficiently, SEBI has been vested with the following powers:

• to approve by−laws of Securities exchanges.
• to require the Securities exchange to amend their by−laws.
• inspect the books of accounts and call for periodical returns from recognised Securities exchanges.
• inspect the books of accounts of financial intermediaries.
• compel certain companies to list their shares in one or more Securities exchanges.
• registration of Brokers and sub-brokers

SEBI has three functions rolled into one body: quasi-legislative, quasi-judicial and quasi-executive.

• It drafts regulations in its legislative capacity.
• It conducts investigation and enforcement action in its executive function.
• It passes rulings and orders in its judicial capacity.