SEBI sets terms for public offer exemption for NBFCs

Non-banking financial companies will be exempt from making a public offer (leading to a listing on the exchanges) only if they prove that that the securities offered to over 50 entities are subscribed to only by the entities, SEBI has ruled.

This is to ensure that the public does not subscribe to the offer. The order also applies to public finance institutions.

The Companies Act specifies that any offer of securities made to over 50 persons automatically triggers a public offer and listing.

SEBI passed an ex-parte interim order against Alchemist Holdings (AHL) for not complying with the Companies Act.

SEBI said that AHL raised Rs 444.67 crore through redeemable preference shares from 426,676 entities without approval.

SEBI barred AHL and its seven directors from collecting money, disposing of any asset without its permission and from diverting the money.

SEBI said AHL had, in fact, offered its redeemable preference shares to general categories of persons such as individuals, trusts corporate bodies, minors, financial institutions, mutual funds, and cooperatives.

Citing the Supreme Court’s verdict on the Sahara case, SEBI said: “Since AHL has made an offer of securities to the public in terms of the Companies Act, it would be SEBI’s legal mandate to administer the provisions of the Companies Act applicable to the said public offer.”

All the entities have to treat this ex-parte interim order as a show cause notice and have 15 days to respond.

raghavendrarao.k@thehindu.co.in

Source: thehindubusinessline