SEBI rejects proposal for higher discount on QIP floor price: Report

The Securities and Exchange Board of India (SEBI) has rejected a proposal put forth by investment bankers requesting relaxed norms for qualified institutional placements (QIPs).

The QIP route is popular with companies seeking equity funding. The request was for 10 percent discount on floor price due to uncertainty around earnings given the economic situation. The mandate is of QIPs not less than the average weekly high or low preceding the relevant date with a 5 percent discount.

However, while investment bankers felt a discount could help attract institutional investors, SEBI reasoned that shares are already trading lower, The Economic Times reported.

“Pricing is possible at a 5 percent discount. Demand for more discounts is not justified. Market is already trading at a steep discount compared to earlier levels,” a source told the paper.

Moneycontrol could not independently verify the report.

Another source told the paper that SEBI has already given concessions 'wherever possible'. “SEBI has been offering relaxations and is looking at ways to make it easier for companies to raise funds from the market,” the source added.

The regulator had earlier relaxed the mandatory six-month gap between successive QIP issues after companies requested the same.

Mehul Savla, Partner, Ripplewave Equity Advisors told the paper that the discount is worth considering as “capital may be crucial for survival and sustaining business operations.”

Savla also rejected the charge that such provision would be misused, adding that promoters being allowed to participate in QIPs creates natural checks on size and pricing as it impacts shareholders. “Retail participation in QIPs happen indirectly as mutual funds and insurance companies play a bigger role in such transactions,” he added.