A shelf prospectus filed during the first offer of securities enables the company filing it, to make a subsequent offer of such securities within one year from the date of opening of the first offer, without issuing another prospectus. Under Section 60A of the Companies Act, 1956, only public financial institutions, public sector banks or scheduled banks whose main object was financing could file a shelf prospectus. However, Section 31 of the Companies Act, 2013 has left it to the discretion of SEBI to determine the class of companies which may file shelf prospectus. Accordingly, SEBI issued the draft 'Proposals for Allowing Certain Class of Companies to File Shelf Prospectus for Public Issuance of Non-Convertible Debt Securities' on 26 November, 2013 and subsequently approved the same at its Board Meeting held on 24 December, 2013.

The draft proposes that the following class of companies may file shelf prospectus: (i) public financial institutions and scheduled banks;(ii) issuers authorized by the notification of CBDT to make public issue of tax free secured bonds with respect to such tax free bond issuances; (iii) Infrastructure Debt Funds Non Banking Financial Companies (IDF-NBFC) regulated by RBI. NBFCs registered with RBI, Housing Finance Companies registered with National Housing Bank and other entities, whose equities or debt securities have been listed on a stock exchange for the last three years, having net worth of at least Rs. 500 crores and a credit rating of not less than 'AA' from a recognized credit rating agency, may, subject to certain conditions, issue a shelf prospectus for raising funds through public issuances of nonconvertible debt securities.

While Section 31 of the Companies Act, 2013 permits the issuance of all types of securities under a shelf prospectus, SEBI has allowed only non-convertible debentures to be issued under shelf prospectus. It is time that the capital markets regulator allowed companies to file shelf prospectus for public issuance of equity shares. Not only will it facilitate in reducing the time and costs involved in raising funds from public, it will also help spur the waning equity capital markets in India.

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Date:September 28, 2015