A recent informal guidance by the market regulator will hit the fundraising plans of OneSource Specialty Pharma, a contract development and manufacturing organisation (CDMO).

OneSource, a public limited company, was involved in a scheme of arrangement with Strides Pharma Science, a listed company and Steriscience Specialties, an unlisted entity. The scheme involved the demerger of businesses from Strides and Steriscience into OneSource.

OneSource issued redeemable non-convertible debentures through private placement, listed on BSE in May last year. The scheme was approved by shareholders and creditors in September and is pending final approval from NCLT.

The matter

OneSource sought informal guidance from SEBI regarding its eligibility to conduct a qualified institutional placement (QIP) immediately post-listing of its shares. Regulation 172(1)(b) of SEBI’s Issue of Capital and Disclosure Requirements mandates that a company must have its equity shares listed for at least a year before it issues shares through a QIP. However, a transferee company in an approved merger scheme may count the listing history of its transferor company towards this requirement.

Since Strides’ shares have been listed for over a year, OneSource sought clarification on whether it could avail the exemption in Regulation 172(1)(b) based on Strides’ listing history and whether Steriscience’s status as an unlisted company impacts its ability to claim the exemption.

SEBI confirmed that all transferor companies involved in the scheme must be listed entities for the transferee company to avail the one-year listing exemption. Since Steriscience is an unlisted company, OneSource is not eligible for the exemption. This means that OneSource must wait for one year post-listing before conducting a QIP.

Experts’ take

“When an entity gets listed through a merger or demerger without an IPO, it inherently implies compliance with all listing norms, as it involves a listed transferor company. In such cases, the fundamental principle is that the listing legacy should be grandfathered upon listing,” said Binoy Parikh, Executive Director, Katalyst Advisors.

According to him, the presence of an unlisted transferor company in a composite scheme does not override the fact that the listing history of the listed entity should carry forward. “This informal guidance effectively disrupts the continuity of listing, which is the core foundation of the exemption for QIP issuance,” he said.

“The regulator’s interpretation could have a bearing on the fundraising plans of listed entities in such unique corporate restructuring cases. This ultimately could impact the restructuring of other listed and unlisted group companies as well,” said Gaurav Pingle, a company secretary.