Securities and Exchange Board of India (SEBI): Introduction of a Revised Framework for Rights Issues
Circular No.: SEBI/HO/CFD/CFD-PoD-1/P/CIR/2025/31 | Dated: March 11, 2025
Amendment Regulations: SEBI (Issue of Capital and Disclosure Requirements) (Amendment) Regulations, 2025 | Published: March 8, 2025

1. Background and Objective

The Securities and Exchange Board of India (“SEBI”) has introduced a new framework to streamline and enhance the efficiency of the Rights Issue process. The updated framework has been formalized through the SEBI (Issue of Capital and Disclosure Requirements) (Amendment) Regulations, 2025, and is supplemented by the Circular dated March 11, 2025.

The framework seeks to:

• Expedite the capital-raising process for listed entities;

• Strengthen investor protection;

• Promote greater transparency and operational efficiency in Rights Issues.

2. Key Highlights of the Circular

A. Revised Timelines for Rights Issue Completion

Under the amended Regulation 85 of the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 (“SEBI ICDR Regulations”):

• Rights Issues must be completed within 23 working days from the date of Board approval by the issuer’s Board of Directors.

• A detailed activity-wise timeline from the date of Board approval to closure of the issue is provided in Annexure Iof the Circular.

• In cases where the Rights Issue involves convertible debt instruments and requires shareholder approval, the overall timeline shall be appropriately adjusted.

B. Subscription Period

As per Regulation 87 of the SEBI ICDR Regulations:

• The subscription period for a Rights Issue must be open for a minimum of seven (7) and a maximum of thirty (30) calendar days.

C. Validation of Bids

To enhance the integrity of the application process:

• SEBI has mandated the implementation of a bid validation system by stock exchanges, depositories, and registrars to the issue.

• This automated system must ensure efficient processing and finalization of the basis of allotment.

• The development and implementation of this system must be completed within six months from the effective date of the Circular.

D. Amendments to the SEBI Master Circular (Circular No. SEBI/HO/CFD/PoD-1/P/CIR/2024/0154 dated November 11, 2024)

The new Circular introduces the following key modifications to the existing Master Circular:

1. Rights Entitlements (REs):

   • The process of crediting REs into investors' dematerialized accounts and their subsequent renunciationmust be disclosed in the Letter of Offer.

2. Application Mechanism:

   • Investors may submit applications through online forms provided by either the registrar to the issue or the issuer itself.

3. ASBA Bid Correction:

   • Any corrections related to ASBA (Application Supported by Blocked Amount) bids must be completed on the issue closure date itself.

4. Filing and Fee Payment:

   • Issuers are required to file the Letter of Offer with SEBI via email.

   • Fees associated with such filings must be paid online.

5. Updated Guidelines for Offer Documents:

   • The guidelines pertaining to public issue offer documents have been revised and updated.

6. Responsibilities of Market Infrastructure Institutions:

   • The roles and responsibilities of Stock Exchanges and Self-Certified Syndicate Banks (SCSBs) in the context of Rights Issues will now mirror those followed in public issues.

3. Effective Date

• The Circular shall come into force with effect from April 7, 2025.

• It shall apply to all Rights Issues approved by the Board of Directors of the issuer on or after this date.

4. Conclusion

The revised Rights Issue framework introduced by SEBI represents a significant regulatory step aimed at improving the Rights Issue process. By introducing stricter timelines, promoting automation, and increasing procedural clarity, SEBI’s initiative is expected to:

• Enhance transparency in capital raising;

• Build investor trust through better disclosures and efficient processing;

• Facilitate timely fund mobilization for issuers, thereby strengthening market integrity and investor participation.

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