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SEBI clarifies lock-in period for warrants

PW Bureau 

A warrant is a derivative that provides the right — not the obligation —  to purchase or sell a security, mostly equity, at a particular price before it expires  New Delhi: The Securities and Exchange Board of India (SEBI) has clarified the lock-in period needed for unlisted warrants, with the clarification being given as part of an informal guidance required by Jindal Steel & Power Ltd (JSPL) regarding the applicability of ICDR (Issue of Capital and Disclosure Requirements) concerning such warrants. JSPL had issued 4.8 crore warrants to one of the promoter group entity, Opelina Finance and Investment Ltd, in November 2017 on a preferential basis.

Seeking informal guidance

The company sought an informal guidance from SEBI to have clarity on regulatory requirements regarding the periodicity of lock-in of pre-preferential holding of the promoters’ shares in the case of allotment of warrants convertible into equity shares. A warrant is a derivative that provides the right — not the obligation — to purchase or sell a security, mostly equity, at a particular price before it expires.

Lock-in period

“The entire pre-preferential allotment shareholding of the allottees, if any, shall be locked in from the relevant date up to a period of six months from the date of trading approval,” SEBI said quoting ICDR norms. “However, where the requirement of trading approval is not applicable to the warrants (i.e. where the holder of the warrants do not intend to list them within 18 months from the date of allotment), lock-in period shall commence from the relevant date and end on the expiry of six months from the date of allotment of the warrants,” it added.