SEBI tighten rules over using IPO proceeds

SEBI has revised the allocation methodology for non-institutional buyers (NICs).

Legislation for Statutory Public Issuance (IPO) (SEBI) seeks to determine the extent to which a company can acquire the disbursement of an issue for future anonymous acquisitions. Along with this, important shareholders have presented with a limited number of shares. Furthermore, the lock-in period for anchor investors has been raised to 90 days and now the maintenance of funds reserved for general corporate will be watched by credit agencies. This information has been disseminated in reportage on 14 January.

Further, SEBI has revised the allocation methodology for non-institutional buyers (NICs). Sebi has amended various features to give an impact on the regulatory framework underneath the ICDR (Issue of Capital and Disclosure Requirements) Regulations.

The regulator said 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object and the amount for general corporate purpose (GCP) total raised shall not exceed 35 per cent of the amount to be withdrawn.

“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 per cent of the amount being raised by the issuer,” SEBI stated.

“The regulator has stipulated certain prerequisites for offer-for-sale (OFS) to the public in an IPO, where draft papers are filed by an issuer without a track record. Beneath this, shareholders with more than a 20 per cent stake in the company before the IPO will be authorised to sell up to 50 per cent of their shares in the OFS,” stated the State Bank of India.

Concerning the lock-in period for anchor investors, SEBI said existing lock-in of 30 days will persist for 50 per cent of the portion allotted to anchor investors and for the remaining portion, lock-in of 90 days from the date of allotment will be applicable for all issues opening on or after April 1, 2022. Further, investors with less than a 20 per cent stake in a firm before the initial share sale will be able to sell only 10 per cent of their shares in the OFS.

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