IPO proceeds utilizing rules tightened by Sebi
Sebi has put a cap on the utilization of proceeds gained by IPO (initial public offering). It has tightened the rules for regulating issue proceeds for unidentified future acquisitions along with restricting the number of shares that can be made available by shareholders. Sebi (Securities and Exchange Board of India) has also extended the lock-in period of anchor investors to 90 days.
Furthermore, under new tweaks, the funds that are reserved for general corporate purposes will be supervised by credit rating agencies. The new rules have been issued in a notification on January 14. Sebi has also revised the allocation methodology for non-institutional investors (NIIs). In this direction, Sebi has amended multiple facets of the regulatory framework under the ICDR (Issue of Capital and Disclosure Requirements) Regulations.
The regulator said that “if a company says in its offer documents, an object for future inorganic growth but fails to identify any acquisition or investment target, the amount for such objects and amount for the general corporate purpose (GCP) will not exceed 35 percent of the total amount being raised.”
“The amount so earmarked for such objects where the issuer company has not identified acquisition or investment target, as mentioned in objects of the issue in the draft offer document… shall not exceed 25 percent of the amount being raised by the issuer,” Sebi said.
“Credit rating agencies (CRAs) registered with the Sebi will be permitted to act as a monitoring agency instead of scheduled commercial banks and public financial institutions. Such monitoring will continue till 100 percent instead of 95 percent utilization of the issue proceeds as at present,” Sebi further said.
The regulator has also issued certain conditions for offer-for-sale (OFS) in an IPO, where draft papers are filed without a track record by an issuer. Under this, Sebi has governed that shareholders who have more than a 20 percent stake in the said company before IPO will be permitted to sell up to 50 percent of their shares in the OFS.