A recent advisory by Sebi to merchant bankers has again sparked a debate around special rights that private equity (PE) investors have in portfolio companies going for public listing. Sebi has directed merchant bankers to ensure that private equity investors do not have any special rights in IPO-bound companies. Implicitly, Sebi wants these rights to fall away at the stage when a company files its updated Draft Red Herring Prospectus (DRHP). For PE investors, this SEBI mandate presents an unnecessary complexity and risk, should there be any unforeseen last-minute issue or change in the IPO roll-out.
The changes may seem a bit odd for Sebi to ask companies to now drop these rights at the stage of filing an updated DRHP, when as per existing norms all special rights in any case fall away upon listing of IPO shares on stock exchanges. Effectively, Sebi is intending to advance the timing of terminating special rights, from the date of listing of IPO shares to the date of filing of updated DRHP.
Please click here to read the full article by Lalit Kumar, published in Economic Times.
Lalit is a corporate commercial, M&A and private equity lawyer with a vast experience of twenty-two years. He has successfully led large and complex transactions for Indian and global corporations.