poonamgandhi
Expert
Published on: Sep 16, 2026
Optional Pricing in Preferential Issue
The Securities and Exchange Board of India (SEBI), via notification no. SEBI/LAD-NRO/GN/2020/21 dated 1st July 2020, introduced the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) (Third Amendment) Regulations 2020. This amendment brought forth regulation 164B concerning Optional Pricing in Preferential Issue. In this article, we delve into the new regulation and its implications.
Understanding the Applicability of New Regulation 164B
According to regulation 164B (1), for frequently traded shares, the price of equity shares to be allotted under preferential issues shall be determined as per regulation 164 or the newly introduced regulation 164B. This temporary pricing mechanism is available for preferential issues executed between 1st July 2020 and 31st December 2020.
Understanding the Temporary Pricing Method
Regulation 164B (2) stipulates that the price of equity shares allotted via preferential issue should not be less than the higher of the following amounts:
- The average of the weekly low and high of the volume-weighted average price (VWAP) of the equity shares listed on the recognized stock exchange during the 12 weeks preceding the relevant date.
- The average of the weekly low and high of the VWAP of the equity shares listed on the recognized stock exchange during the 2 weeks preceding the relevant date.
In the context of the current pandemic and economic challenges, this temporary pricing method is beneficial for entities as it allows them to raise funds at a more practical price.
Comparison of Existing and New Temporary Pricing Methods
The new regulation offers additional flexibility without replacing the existing pricing method, allowing issuers to choose between the two. Below is a comparison of both methods:
| Existing Pricing Method | New Temporary Pricing Method |
The pricing of shares will be at least higher of the following:
| The pricing of shares will be at least higher of the following:
|
Other Important Provisions
- The above pricing methodologies apply to allotments made via preferential issues between 1st July 2020 and 31st December 2020 (or from the regulation notification date).
- Securities allotted on a preferential basis using this pricing method will be locked-in for 3 years.
- The same pricing method must be applied to all allotments from the same shareholders.
Entities considering preferential issues might also be interested in related procedural topics such as starting a publishing company in India or seeking appropriate business permits like FSSAI registration or license in Telangana.
For broader knowledge on professional compliance, explore the specifics of Professional Tax in Puducherry or the complex nature of FSSAI License vs. FSSAI Registration.
Lastly, for those needing financial support or loan information, understanding different prospects like the HDFC Business Loan process can be insightful.
In preparation for property-related transactions, you might review Maharashtra Property Valuation guidelines.
Additionally, for agri-business enthusiasts, check out government initiatives like the Formation and Promotion of 10,000 Farmer Producer Organizations (FPO) Scheme.