SEBI tightens rules for IPO

Tightening regulations for initial public offerings (IPOs), SEBI has put a limit on the utilisation of the issue proceeds for unidentified future procurements and limited the number of shares that can be provided by significant shareholders.

Additionally, the regulator has extended anchor investors' lock-in period to 90 days and now, funds earmarked for general corporate purposes will be observed by credit rating agencies, as per a notification released on January 14. Additionally, SEBI has updated the allocation methodology for non-institutional investors (NIIs).

To give effect to these, SEBI has amended different aspects of the regulatory framework under the ICDR (Issue of Capital and Disclosure Requirements) Regulations. It comes amid a slew of new-age technology firms filing draft papers with SEBI to raise funds via initial public offerings (IPOs).

The regulator told the media that if a firm in its offer documents sets out an object for future inorganic growth but has not recognised any procurement or investment goal, the amount for such objects and amount for the general corporate purpose (GCP) will not surpass 35% of the total amount being raised. It is observed that lately, in some of the draft offer documents, new-age technology firms are offering to raise fresh funds for objects where the object is named funding of inorganic growth initiatives without disclosing details.

The amount so reserved for such objects where the issuer firm has not recognised procurement or investment target, as specified in objects of the issue in the draft offer document will not surpass 25% of the amount being raised by the issuer, as per SEBI. But, such limits will not apply, if the planned procurement or strategic investment object has been recognised and suitable specific disclosures are made at the time of filing of the offer document.

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