Lok Sabha Question No. 2461 (UNSTARRED), answered on 2019-07-08
Subject: Regulation on Capital Raising by Companies
Ministry: CORPORATE AFFAIRS
Asked by: Gitaben Vajesingbhai Rathva

## GOVERNMENT OF INDIA

## MINISTRY OF CORPORATE AFFAIRS

## LOK SABHA

## UNSTARRED QUESTION NO.  2461

ANSWERED ON MONDAY, THE 8th JULY, 2019/ ASHADHA 17, 1941 (SAKA)

## REGULATION ON CAPITAL RAISING BY COMPANIES

## QUESTION

2461 : SHRIMATI RATHVA:

SMT. GITABEN:

SHRI VAJESINGHBHAI:

Will the Minister of CORPORATE AFFAIRS be pleased to state:

कॉर्पोरेट कार्य मंत्री

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

## ANSWER

THE MINISTER OF STATE FOR FINANCE AND CORPORATE AFFAIRS

वित्त एिं कॉर्पोरेट कार्य मंत्रालर् में राज्र् मंत्री

( SHRI ANURAG SINGH THAKUR )

(श्री अनुराग स ंह ठाक ु र)

(a) & (b):  The listed companies as well as unlisted companies are raising capital. The information given by SEBI in respect of capital raised by listed companies  through  Private Placement  &  Stake  Sale  is provided in Annexure  A  of  the  reply.  As  per  SEBI  in  stake  sale  through  IPO,  the companies do not receive the proceeds and the proceeds accrue only to the stake selling shareholders.

Further, as per data abstracted from MCA-21 data base of Ministry of Corporate  Affairs,  18,162  number  of  unlisted  companies  (other  than unlisted companies which have filed financial statements in XBRL Format) have received capital through private placements which are as under:-

| Financial year   | No. of companies   | Total amount of capital raised through private placement by unlisted companies. (Rs in cr.)   |
|------------------|--------------------|-----------------------------------------------------------------------------------------------|
| 2015-16          | 4                  | 1,953                                                                                         |
| 2016-17          | 9478               | 13,656                                                                                        |
| 2017-18          | 8629               | 388                                                                                           |
| 2018-19          | 51                 | 4,524                                                                                         |
| Total            | 18,162             | 20,151 CR                                                                                     |

(c): The Companies Act, 2013 does not provide for pricing of shares/securities to be issued by the companies. However, under Section 42  of  the  Companies  Act,  2013  read  with  Rule  12  &  14  of  Companies (Prospectus and Allotment of Securities) Rules, 2014, the issuer company is required to give basis or justification of price (including premium, if any) at  which  offer  or  invitation  is  made  and  copy  of  valuation  report  are required to be filed with Registrar of Companies (ROC).

The SEBI has informed regarding Listed Companies that Preferential allotments including interalia the eligibility pricing provisions are governed by  Chapter  V  -  Preferential  Issue  of  SEBI  (ICDR)  Regulations,  2018.  The Qualified  Institutions  Placements  (QIP)  including  inter  alia  the  Eligibility conditions,  pricing  are  governed  by  Chapter  VI  -  Qualified  Institutions Placement of the SEBI (ICDR) Regulations, 2018.

Listed NCDs/ NCRPS issued on private placement basis are governed by the provisions of SEBI (Issue and Listing of Debt Securities) Regulations 2008, SEBI (Issue and Listing of Non-Convertible Redeemable Preference Shares) Regulations, 2013, Companies Act, 2013 and Companies (Prospectus  and  Allotment)  Rules,  2014.  The  issuer  is  required  to  make disclosures specified in these Regulations and comply with other circulars/ guidelines  issued  under  these  Regulations.  SEBI  (Listing  Obligations  and Disclosure  requirements)  Regulations,  2015  specify  disclosures  that  are required to be made on a continuous basis for listed NCDs/ NCRPS.

(d)  (e)  &  (f):  No  such  information  is  available  with  Ministry  of  Corporate Affairs.

However, in respect of listed companies, the SEBI has informed that with regard to pricing in Preferential Allotment and Qualified Institutional Placement (QIP), the issuer companies are required to comply with pricing provisions in Chapter V & Chapter VI of SEBI (ICDR) Regulations, 2018, For, Offer for Sale through initial public offers, as per Regulation 28(1) of the SEBI (ICDR) Regulations, 2018, companies are free to determine the issue price  in  consultation  with  the  lead  merchant  banker  or  through  book building  process,  However,  keeping  in  mind  the  need  to  protect  the investors, SEBI has mandated elaborate disclosures requirements including inter alia risk factors, comparison of Price/Earnings ratio of the issuer company with peer group/industry. These measures are expected to enable the investors to take an informed investment decision, With respect to NCDs/ NCRPS, SEBI does not interfere in determination of price of NCDs/ NCRPS. The price depends on economic factors, domestic and international events, market sentiments, corporate performance, perception  of  future  economic  growth,  etc. SEBI  mandates  elaborate disclosures requirements to enable investors in taking informed investment decisions.

*****

AnnexureA

The  SEBI  has  furnished  following  information  in  respect  of  raising  of capital through private placement and stake sales.

## (I)    SEBI  has  informed  about  private  placement  data  for  equity  shares  of Listed Companies till May 2019 is as under:

|                | Preferential Allotment   | Preferential Allotment   | Preferential Allotment   | Qualified Institutional Placement   |
|----------------|--------------------------|--------------------------|--------------------------|-------------------------------------|
| Financial Year | No.                      | Amount (in Rs. Crores)   | No.                      | (in Rs. Crores)                     |
| 2016-17        | 410                      | 44249                    | 20                       | 8464                                |
| 2017-18        | 407                      | 59472                    | 53                       | 67257                               |
| 2018-19        | 399                      | 210138                   | 14                       | 8678                                |
| 2019-20        | 59                       | 55678                    | 01                       | 3172                                |

- (II)  Further,  SEBI  has  informed  about  Stake  Sales  data  for  Equity  Shares (Offer for Sale through Initial Public offer) till May 2019 is as under:
- (III)  Further,  SEBI  has  informed  about  the  details  of  listed  issuances  of Non-Convertible Debentures (NCDs)/ Non-Convertible Redeemable Preference Shares (NCRPS) for the last three financial years and current financial year issued on private placement basis till May 2019 is as under:

| Stake Sale Data for Equity Shares (Offer for Sale through Initial Public Offer )   | Stake Sale Data for Equity Shares (Offer for Sale through Initial Public Offer )   | Stake Sale Data for Equity Shares (Offer for Sale through Initial Public Offer )   |
|------------------------------------------------------------------------------------|------------------------------------------------------------------------------------|------------------------------------------------------------------------------------|
| Financial Year                                                                     | No. of companies                                                                   | Amount raised in Rs. Crores                                                        |
| 2016-17                                                                            | 17                                                                                 | 16362                                                                              |
| 2017-18                                                                            | 36                                                                                 | 61825                                                                              |
| 2018-19                                                                            | 12                                                                                 | 9632                                                                               |
| 2019-20*                                                                           | 4                                                                                  | 2688                                                                               |

| Financial Year   | No. of issues (NCDs)   | Amount Raised (Rs. Crore)   | No. of issues (NCRPS)   | Amount Raised (Rs. Crore)   |
|------------------|------------------------|-----------------------------|-------------------------|-----------------------------|
| 2016-17          | 3,377                  | 6,40,716                    | 3                       | 139.50                      |
| 2017-18          | 2,706                  | 5,99,147                    | Nil                     | Nil                         |
| 2018-19          | 2,358                  | 6,10,317                    | 2                       | 750.00                      |
| 2019-20*         | 364                    | 1,13,641                    | 3                       | 273.90                      |