SEBI Tightens Rules Regarding IPO, Read Details Here

Mumbai, 17th January 2022: The Securities and Exchanges Board of India (SEBI) has tightened rules concerning Initial Public Offering (IPO).

SEBI has limited the use of proceeds from the issue for future undisclosed acquisitions. In addition, the number of shares that can be offered by significant shareholders has been limited. The regulator has extended the lock-in period of anchor investors to 90 days and now the funds reserved for general corporate purposes will be monitored by credit rating agencies. This information has been given in a notification issued on January 14.

As per the notification, SEBI has also revised the allocation method for non-institutional investors (NIIs). To give effect to these, SEBI has amended various elements of the regulatory framework under the Issue of Capital and Disclosure Requirements (ICDR) Regulations. SEBI has done this at a time when new age technology companies are filing drafts with SEBI to increase funds through an initial public offering (IPO).

The regulator stated that if a company determines future inorganic growth in its offer documents of an object, but does not identify an acquisition or investment target, the amount of such object and the amount for general corporate purpose (GCP) total raised shall not exceed 35 per cent of the amount to be withdrawn.

SEBI said, “The amount has been prescribed for such objects, for which the issuing company has not identified the acquisition or investment target, as mentioned in the draft offer document, in the objects of the issue… being raised by the issuer.” shall not exceed 25 per cent of the amount.”

SEBI further said that the amount raised for general corporate purposes would be under surveillance and the use of the same would be disclosed in the report of the monitoring agency. The report will be placed before the Audit Committee for consideration “on quarterly basis” instead of “on annual basis”.

With consideration to the lock-in period for anchor investors, SEBI said that the existing lock-in of 30 days will continue with 50 per cent of the allotted share to anchor investors and the remaining 90 days from the date of allotment on April 1, applicable to all issues opened on or after 2022.