Stricter IPO norms: Cap on proceeds for future acquisitions, company use

The Securities and Exchange Board of India (Sebi) on Tuesday tightened the rules for utilization of proceeds from the preliminary public providing (IPO) by corporations.
The regulator, in a board assembly, has prescribed sure circumstances for promoting shares in an Offer-for-Sale (OFS) beneath IPO by vital shareholders and has prolonged anchor buyers’ lock-in interval to 90 days for half of the quota for such buyers.
The regulator has determined to place a cap on IPO proceeds earmarked for making future acquisition of unspecified targets and can convey beneath monitoring the funds reserved for basic company functions. In addition, Sebi has determined to revise allocation methodology for non-institutional buyers (NIIs).
The Sebi transfer follows a slew of new-age know-how corporations submitting draft papers with Sebi to boost funds by IPOs. “Price discovery is a function of the market and that is how it works globally as well,” Sebi Chairman Ajay Tyagi mentioned at a media briefing after the board assembly. The board of Sebi cleared a proposal to prescribe a mixed restrict of as much as 35 per cent of the contemporary situation dimension for deployment on such objects of inorganic progress initiatives (takeovers) and basic company goal (GCP), the place the meant acquisition/strategic funding is unidentified within the objects of the provide. However, such limits won’t apply, if the proposed acquisition or strategic funding object has been recognized and appropriate particular disclosures are made on the time of submitting of the provide doc.
In a few of the draft provide paperwork, new-age know-how corporations have proposed to boost contemporary funds for objects the place the thing is termed as ‘funding of inorganic growth initiatives’.

Sebi mentioned the quantity raised for GCP might be introduced beneath monitoring and utilisation of the identical might be disclosed within the monitoring company report. The report might be positioned earlier than the audit committee for consideration “on a quarterly basis” as an alternative of “on an annual basis”.
The regulator has prescribed sure circumstances for OFS to the general public in an IPO, the place draft papers are filed by an issuer with out monitor file. Under this, shares provided on the market by promoting shareholders, individually or with individuals performing in live performance, holding greater than 20 per cent of pre-issue shareholding of the issuer, shouldn’t exceed over 50 per cent of their pre-issue shareholding. Further, shares provided on the market by such promoting stakeholders, holding lower than 20 per cent of pre-issue shareholding of the issuer, shouldn’t exceed greater than 10 per cent of pre-issue shareholding of the problem. With regard to lock-in interval for anchor buyers, Sebi mentioned current lock-in of 30 days will proceed for 50 per cent of the portion allotted to anchor buyers and for the remaining portion, lock-in of 90 days from the date of allotment might be relevant for all points opening on or after April 1, 2022.

In the case of book-built points, Sebi mentioned a minimal value band of at the least 105 per cent of the ground value might be relevant for all points opening on or after notification within the official gazette. For book-built points opening on or after April 1, 2022, Sebi mentioned one-third of the portion accessible to NIIs might be reserved for candidates with software dimension of greater than Rs 2 lakh and as much as Rs 10 lakh.
Meanwhile, to additional safeguard the curiosity of mutual fund buyers, Sebi on Tuesday determined to mandate trustees of mutual funds to acquire the consent of unitholders when nearly all of trustees determine to wind up a scheme.