India: the SEBI pricing floor is a statutory formula

A conversion price that refixes to a discount to future market prices is not available to an NSE or BSE listed company. SEBI ICDR Regulation 164 floors a preferential issue at the higher of the 90-trading-day and the 10-trading-day volume weighted average price, and the price or the formula must be fixed and disclosed before the shareholder vote.

Key takeaways

• The floor takes the higher of two look-backs. Regulation 164 sets the minimum price for a preferential issue of frequently traded shares at the higher of the 90-trading-day and the 10-trading-day volume weighted average price preceding the relevant date, so no direction of the market produces a bargain.
• The relevant date is elected once. For convertible securities the issuer may take it 30 days before the shareholders' meeting, or 30 days before the date the holder becomes entitled to apply for the underlying shares. The election is disclosed up front and is not revisited later.
• Determined upfront is the phrase that closes it. Under Regulation 169 a warrant's exercise price, or the formula for arriving at it, has to be determined and disclosed at the outset, alongside a capped tenure and a minimum proportion of the consideration payable on subscription.
• India has no equity facility. No committed equity line, no standby equity facility and no at-the-market programme. Every route is a discrete priced event: the preferential allotment, the QIP, the rights issue and the FCCB.
• The floor follows a foreign investor across the border. A non-resident subscription sits additionally under the FEMA non-debt instrument rules, whose pricing guidelines have to be read alongside the ICDR floor rather than instead of it.

Regulation 164 is a formula, not a convention

Most of the markets in this directory constrain a market-referenced conversion price indirectly — through a capacity rule, a discount cap or a vote. India does it head-on. Regulation 164 of the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 fixes the minimum price of a preferential issue of frequently traded shares at the higher of two volume weighted averages, one taken over 90 trading days and one over 10 trading days preceding the relevant date.

Taking the higher of a long and a short look-back is what makes the rule symmetric. In a falling market the 90-day average holds the price up; in a rising one the 10-day average does. There is no path through it, and a conversion price recomputed at each conversion against a recent VWAP would be lower than the floor by construction on any occasion an investor would want to use it.

The relevant date is chosen once, before the money

The second half of the mechanism is the timing. For a convertible security the issuer elects the relevant date — 30 days before the general meeting that approves the issue, or 30 days before the date on which the holder becomes entitled to apply for the underlying shares. Either is permissible. What is not permissible is treating the choice as live: the election is made and disclosed in the explanatory statement circulated to shareholders, and SEBI has taken enforcement action where an issuer sought to change it afterwards.

Regulation 169 completes the picture for warrants. The exercise price, or the formula for determining it, must be determined upfront and disclosed, with the tenure capped and a stated minimum proportion of the consideration payable on subscription. A formula is expressly contemplated. A formula that reads the market on the day of exercise, after the shareholders have voted, is not.

There is no Indian equity facility

The other half of the question can be answered in a sentence: no Indian listed issuer runs a standby equity facility, a committed equity line or an at-the-market programme, because no chapter of the ICDR Regulations contemplates one. The available routes are the preferential allotment to named investors, needing a special resolution and an explanatory statement; the QIP, open only to qualified institutional buyers and priced off its own, far shorter look-back; the rights issue; and the offshore FCCB. Each is a single, dated, priced transaction.

The QIP deserves its own sentence, because it is the one route that does admit a discount: Regulation 176 floors it at a two-week average, and a capped discount to that floor is available with a special resolution. It still does not open India to this structure, because a QIP may be placed only with qualified institutional buyers, subject to minimum allottee counts and a ceiling per allottee, so it cannot serve a single capital provider drawing down over time.

What is unavailable, and what an Indian issuer uses instead

Lock-in, and the floor that crosses the border

Securities allotted on a preferential basis carry a statutory lock-in under Regulation 167, running from the date of trading approval and materially longer for promoter and promoter-group allottees than for others. The allottee's own pre-issue holding is separately locked from the relevant date for a period after trading approval, which stops an investor pre-positioning and selling into its own allotment. After the lock-in the shares trade normally.

For a non-resident there is a second layer. The FEMA non-debt instrument rules and the Reserve Bank's pricing guidelines apply to the subscription in their own right, and for a listed company they have to be read alongside the ICDR floor. The practical effect an outside investor should assume until counsel confirms otherwise is that the regulatory floor follows it across the border rather than relaxing for it.

Convertibles, FCCBs and the offshore route

Domestic convertibles follow the preferential-issue chapter, floor included, which is why an Indian convertible looks nothing like the market-referenced structures used in North America. The FCCB is different: issued offshore under the 1993 scheme for convertible bonds and depositary receipts, and caught by the Reserve Bank's external commercial borrowing framework with its own end-use and maturity conditions. Indian usage of "convertible debenture" is a third thing again — compulsorily and non-convertible debentures are a domestic fixed-income product with a different purpose, which is why the phrase carries so much study traffic and so little transaction intent. The listed-issuer instrument is on the convertible debentures page; see also the instruments hub, convertible notes for listed issuers and, where the company is also United States listed, Rule 144.

Related reading

• All markets
• Pakistan
• Taiwan
• Israel
• Japan
• Check whether you qualify

Primary sources

• SEBI — ICDR Regulations, 2018 (consolidated, last amended 21 March 2026)
• Securities and Exchange Board of India
• Reserve Bank of India
• National Stock Exchange of India

Financing an Indian issuer: frequently asked questions

How is a preferential allotment priced in India?

Under Regulation 164 of the SEBI ICDR Regulations the price of a preferential issue of frequently traded shares must be not less than the higher of the volume weighted average price over the 90 trading days preceding the relevant date and the volume weighted average price over the 10 trading days preceding it. Taking the higher of a long and a short look-back is what makes a deeply discounted Indian preferential issue impossible, whichever way the share price has moved.

Can an Indian issuer use a conversion price that refixes with the market?

No. The price of a preferential issue is floored by Regulation 164, and Regulation 169 requires the exercise price of a warrant, or the formula for arriving at it, to be determined and disclosed upfront. A strike recomputed against a recent volume weighted average at each conversion would sit below the floor on exactly the occasions an investor would want to use it, and it would not be a price the shareholders had approved.

Can an Indian listed company run a standby or committed equity facility?

No. Nothing in the ICDR Regulations contemplates an investor subscribing repeatedly on the issuer's demand at each drawdown's market price. The available routes are all discrete, dated, separately priced events: the preferential allotment to named investors, the qualified institutions placement to institutional buyers, the rights issue, and the foreign currency convertible bond issued offshore.

When can an allottee sell shares from an Indian preferential issue?

After the statutory lock-in under Regulation 167 has run. It starts from the date of trading approval and is materially longer for promoter and promoter-group allottees than for anyone else, and the allottee's own pre-issue holding is separately locked from the relevant date. Once it expires the shares trade normally on the NSE or the BSE. Confirm the applicable periods against the current Regulations, because they have been shortened more than once.