With stringent rules for initial public offering (IPO), SEBI has put a cap on the use of issue proceeds for undisclosed future acquisitions and restricted the number of shares that can be offered by significant shareholders.
Further, the regulator has extended the lock-in period of anchor investors to 90 days and now, funds reserved for general corporate purposes will be monitored by credit rating agencies, according to a notification issued on January 14.
In addition, SEBI has revised the allocation methodology for non-institutional investors (NIIs).
To give effect to these, SEBI has amended various aspects of the regulatory framework under the ICDR (Issue of Capital and Disclosure Requirements) Regulations.
This comes amid the filing of draft papers with SEBI for raising funds through initial public offerings (IPOs) by new-age technology companies.
The regulator said that if a company in its offer documents sets out an item for future inorganic growth, but has not identified any acquisition or investment target, the amount of such items and the amount for general corporate purpose (GCP). shall not exceed 35 per cent. Out of the total amount being raised.
It has been observed that recently, in some draft proposal documents, new age technology companies are proposing to raise fresh funds for items where the object is referred to as ‘financing inorganic development initiatives’ without giving details.
“Such an amount has been earmarked for such items, where the issuing company has not identified an acquisition or investment target as specified in the issue items in the draft offer document … 25 per cent of the amount being raised by the issuer shall not exceed Rs.
However, such limits will not apply if the proposed acquisition or strategic investment object is identified and appropriate specific disclosures are made at the time of filing the offer document.
Experts believe that the inability to raise funds for undisclosed acquisitions in the future will stifle some unicorns’ fundraising plans, especially where such firms may have no other use for the capital and where existing shareholders can sell. are not inclined to.
Further, SEBI said that the amount raised for general corporate purposes would be brought 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”.
Credit Rating Agencies (CRAs) registered with SEBI will be allowed to act as a monitoring agency instead of scheduled commercial banks and public financial institutions.
SEBI said such monitoring would continue up to 100 per cent instead of 95 per cent utilization of the issue, as it is at present.
The regulator has prescribed certain conditions for offer-for-sale (OFS) to the public in IPOs, where draft papers are filed by an issuer without a track record.
Under this, SEBI said that shareholders holding more than 20 per cent stake in the company before the IPO will be allowed to sell 50 per cent of their shares in the OFS.
In addition, investors holding less than 20 per cent stake in a firm prior to the initial share-sale will be able to sell only 10 per cent of their shares in the OFS.
With regard to the lock-in period for anchor investors, SEBI said that the existing lock-in of 30 days shall continue from the date of lock-in of 50 per cent of the allotted portion to anchor investors and 90 days for the remaining portion. The allotment will be applicable for all issues opened on or after April 1, 2022.
In case of book-built issues, SEBI said a minimum price band of at least 105 per cent of the floor price shall be applicable for all issues opened on or after notification in the Official Gazette.
For book-built issues opening on or after April 1, 2022, SEBI said one-third of the amount available to NIIs will be reserved for applicants with application size above Rs 2 lakh and up to Rs 10 lakh.
In addition, two-thirds of the share available to NIIs will be reserved for applicants with an application size of more than Rs 10 lakh.
In case of NII category, the allotment of securities will be on ‘draw of lot’ as is currently applicable for retail investor category.
The amendment comes after the board of SEBI approved the proposals in this regard in its meeting last month.
This came against the backdrop of 63 companies raising a record amount of Rs 1.2 lakh crore through initial share-sale in 2021.
This was over Rs 26,611 crore raised by 15 companies through initial share sales throughout 2020 and almost double the previous best of Rs 68,827 crore by 36 companies in 2017.
(Except for the title, this story has not been edited by NDTV staff and is published from a syndicated feed.)