Overhaul changes have been made effective by SEBI vide the amendment dated March 03, 2025. The changes primarily pertain to the Rights Issues and the SME IPOs.

Key takeaways with regard to the Rights Issue amendments are as under:

1. Ineligible Companies:
• Along with the existing  conditions, Companies are now required to ensure that their trading is not suspended as a disciplinary measure on the reference date in order to be eligible to make a rights issue.
2. Renunciation of Rights Entitlement/ Specific Investors in Rights Issue/ Allotment of Under-subscribed Shares
• A big relief for the Promoter & Promoter Group, who didn’t have the funds to subscribe to the Rights Issue, they can now renounce their Entitlement to specific investors, subject to this disclosure being disclosed in the Offer Document. 
• In addition, under the erstwhile Law, the unsubscribed shares used to go waste. But now, the Concept of Specific Investors has been introduced.
• Subject to certain conditions, as mandated, Promoters can now disclose specific investors for the allotment of unsubscribed shares.
3. Requirement of appointing Merchant Bakers/ Lead Managers done away with:
• Issuers are now directly responsible for compliance, appointment of intermediaries, filing documents, and ensuring the smooth execution of the rights issue. The erstwhile requirement of appointing the Merchant Bankers/ the Lead Managers has been done away with. Even the requirement of the lead manager to conduct due diligence has been removed.
4. Mandatory appointment of Monitoring Agency
• All the companies coming up with a rights issue, irrespective of the issue size, are now required to appoint Monitoring Agency for monitoring the proceeds of the issue.
5. Filing of Offer Documents
• Irrespective of issue size, the draft letter of offer are now needed to be filed only with the stock exchange(s) (to be filed with SEBI only for information and dissemination).  
6. Disclosure of Promoter Transactions
• Under the erstwhile law, with regard to reporting of the transactions in the company’s securities by the promoters and promoter group between the date of filing the draft letter of offer/letter of offer, no specific timeline was mandated. Now, it has been mandated to report such transactions to the stock exchange(s) within 24 hours.
• Any pre-issue placement by the issuer must also be reported within 24 hours.
7. Abolishment of Abridged Letter of Offer
• The requirement for preparing and circulating an Abridged Letter of Offer has been removed. The issuer will now only circulate the Letter of Offer to shareholders.
8. Flexibility in Issue Opening and Closing Period
• The erstwhile requirement of a minimum 7 days and maximum 30 days issue period has been removed. SEBI may now specify the period from time to time.
9. Objects of the Issue
• In the Objects Section of the Letter of Offer, lot more clarity and objectivity has been brought in.

 Impact:

• The amendments, as promulgated, are a big sign of relief for the mid-size companies that intended to raise funds, but were stuck due to the procedural glitches.
• The concept of “Specific Investors” for renunciation or allotment of unsubscribed shares, would surely give a much-needed breather to the Promoters. Companies would be able to see better subscriptions for their Rights Issues.

Amendments with respect to SME IPOs are being circulated separately.

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