Lok Sabha Question No. 3325 (UNSTARRED), answered on 2017-08-04
Subject: Regulation of Capital Raising by Companies
Ministry: FINANCE
Asked by: RAMSINH PATALYABHAI RATHWA

## GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENT OF ECONOMIC AFFARRS

## LOK SABHA UNSTARRED QUESTION NO. 3325 TO BE ANSWERED ON FRIDAY, 4TH AUGUST, 2017/ SHRAVANA 13,1939 (SAKA)

## REGULATION OF CAPITAL RAISING BY COMPANIES

## QUESTION

## 3325. SHRI RAMSINH RATHWA:

Will the Minister of Finance be pleased to state:

- whether & number of companies have received capital through private placements and stake sales;
- whether there is any regulation of such capital raising and ensuring prudent valuations of companies to protect investors and the public and if so, the details thereof;
- if so, the details of such transactions over the last three years and the current year;
- whether such transactions have taken place at high valuations; and
- (e) if so, the details thereof and if not; the reasons and implications thereof?

## ANSWER

## MINISTER OF STATE IN THE MINISTRY OF FINANCE

## (SHRI ARJUN RAM MEGHWAL)

(a) & (b): The provisions of Section 42 of the Companies Act; 2013 dealing with Private Placement are applicable to all the companies. Section 62 of the Companies Act; 2013 provide for the requirements which are applicable when a company issues further shares   Section 62(1)(c) and rules made thereunder read with Section 42 of the Companies Act; 2013 require the valuation of shares in case the shares are offered by a company to persons other than existing member or employee of the company.

Details of funds raised by listed entities through private placement Preferential  Issues, Qualified Institutions Placement (QIP) and Institutional Placement Programme (IPP) during the last three years and the current year are placed at Annexure-I. ie ,

Details of funds raised by listed entities through stake sale / Offer for Sale (OFS) through public issue route and stock exchange mechanism during the last three years and the current year are placed at Annexure-II

(c): Companies raise capital in terms of the provisions of Companies Act; 2013. Listed entities Or an seeking listing after making & public issue are required to follow the regulatory framework under SEBI (Issue of Capital and Requirements) Regulations, 2015 (LODR Regulations) The said regulations provide for a disclosure based regime. entity requirements for private placements by listed entities in the form of preferential issues, QIP and IPP and in respect of OFS made through the public issue route are prescribed in the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 (ICDR Regulations). Pricing

The requirement under Section 62(1)(c) and Section 42 of the Companies Act; 2013 read with relevant rules provides for making adequate disclosures and valuation requirement. These are aimed at protecting the interest of investors and the public.

(d) & (e): SEBI has conveyed that there is no information available with them that would suggest that such transactions have taken place at high valuations.

In the case of public issues, the issuer is free to determine the of specified securities in consultation with the lead merchant  banker or through the book building process. In the case of private  placements   made in the form of preferential issues and QIPs, the regulations specify the minimum allotment price and the issuers may make allotments above such minimum price. price

| Type of Issuance    | April 2014 March 2015   | April 2014 March 2015   | April 2015 March 2016   | April 2015 March 2016   | April 2016 March 2017   | April 2016 March 2017   | April 2017 June 2017   | April 2017 June 2017   |
|---------------------|-------------------------|-------------------------|-------------------------|-------------------------|-------------------------|-------------------------|------------------------|------------------------|
| Type of Issuance    | No.                     | Amount (NR Cr)          |                         | Amount (INR Cr)         | No.                     | Amount (INR Cr)         | No.                    | Amount (NR Cr)         |
| QIP                 | 12                      | 25575                   | 24                      | 14588                   | 21                      | 13371                   |                        | 22598                  |
| Preferential Issues | 354                     | 24774                   | 333                     | 49916                   | 401                     | 44103                   | 129                    |                        |
| IPP                 |                         | 418                     | 0                       |                         | 0                       |                         | 0                      | 0                      |
| Total               | 367                     | 50767                   | 357                     | 64504                   | 422                     | 57474                   | 136                    | 31635                  |

Source: SEBI

## Annexure-II

|                  | April 2014 March 2015   | April 2014 March 2015   | April 2015 March 2016   | April 2015 March 2016   | April 2016 March 2017   | April 2016 March 2017   | April 2017 June 2017   | April 2017 June 2017   |
|------------------|-------------------------|-------------------------|-------------------------|-------------------------|-------------------------|-------------------------|------------------------|------------------------|
| Type of Issuance | No.                     | Amount (NR Cr)          |                         | Amount (INR Cr)         | No.                     | Amount (INR Cr)         | No.                    | Amount (INR Cr)        |
| OFS-Public       | 3                       | 767                     | 21                      | 8064                    | 19                      | 17736                   | 8                      | 4580                   |
| OFS-SE           | 26                      | 26887                   | 18                      | 19814                   | 22                      | 7843                    | 5                      | 1407                   |
| Total            | 29                      | 27654                   | 39                      | 27878                   | 41                      | 25579                   | 13                     | 5987                   |

Source: SEBI