Mumbai: Market regulator Sebi has proposed to tighten the rules for the initial public offering (IPO), which currently witnesses busy activities.
Sebi, in a discussion paper, it has suggested that at least half of the number of shares allocated for anchor investors must have a key 90 days or more, up from 30 days.
The regulator has proposed that companies aimed at using public money must be more specific about raising funds, rather than just stating ‘for the acquisition in the future’ as one of the goals.
As a result, regulators seek to overcome the amount of money that can be submitted by the company through the IPO to fund inorganic growth.
However, through precedents, every change in the rules may not apply in three-four months.
The purpose of the consultation paper is to look for comments from the public.
In particular, the proposed change in the rules related to the IPO object where the purpose of increasing funds is to make the acquisition of the future / strategic investment without identifying specific targets, conditions for offers for significant shareholders, stock locks allocated for the anchor investors and Monitoring funds raised for the purposes of public companies.
In his paper, Sebi said that the combined limit of up to 35% of the money raised by the company through the IPO can be deployed towards the initiative of inorganic growth and the company’s general purpose (GCP), where the target for the acquisition or strategic investment is unknown.
This limit will not apply if the target for the acquisition or strategic investment has been identified and disclosed in a bidding document.
Changes in the proposed rules can make it difficult for the startup and new age technology company to raise funds.
Regulators also propose that companies must make detailed disclosures, quarterly about the use of funds raised for GCP.
At present, the company can set aside up to 25% of the funds raised for GCP but not closely monitored, said Sebi.
The regulator looks for it, in the company’s IPO where no promoters can be identified, stock divestments by all types of shareholders who hold more than 20% can be limited to 50% of their pre-problem holders.
In addition, their share ownership must be locked for six months after the IPO, he said.