SEBI said that certain conditions have been fixed for the sale of shares under OFS by the shareholders in the IPO. The lock-in period for anchor investors has been increased to 90 days.
With many companies continuously coming up with their IPO, SEBI has made many important changes in the rules related to the use of the money raised from the IPO. Markets regulator SEBI has made this change to tighten the rules related to the use of funds raised from IPO. Under this, companies that bring IPOs will have to disclose the acquisitions made through the money being raised from the market. SEBI has set a limit to use the proceeds from the IPO for any future acquisition ‘target’. In addition, the reserves for general corporate purposes will also be monitored. These decisions were taken in the SEBI board meeting held on Tuesday.
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These important changes have been made
- In a statement issued after the board meeting, SEBI said that certain conditions have been fixed for the sale of shares under the Offer for Sale (OFS) by the shareholders in the IPO. Apart from this, it has been decided to increase the lock-in period for anchor investors to 90 days. Along with this, SEBI has also decided to change the modalities of allocation for non-institutional investors (NIIs).
- SEBI Chairperson Ajay Tyagi said that the regulator does not intend to control the IPO price in any manner. Talking to the media after the board meeting, he said, “Price discovery is the job of the market. This is how it happens globally.”
- SEBI’s Board of Directors has said that only 35 per cent of the funds raised through IPO can be used for such acquisitions and general corporate purposes in which the target of acquisition or strategic investment has not yet been ‘identified’. However, this condition will not apply in case of acquisitions in which the target has been identified and disclosed at the time of filing the IPO document.
- Sebi said that it has come to the notice that many new age technology companies propose to raise funds for such purposes, which are related to such expansion initiatives. Apart from this, the amount raised for general corporate purposes will be brought under surveillance and its use will be disclosed in the report of the monitoring agency, the regulator said.
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- This report will now be placed before the audit committee for consideration on a quarterly basis instead of an annual one. In addition, Credit Rating Agencies (CRAs) registered with SEBI will be allowed to act as a monitoring agency for utilization of funds instead of scheduled commercial banks and public financial institutions.
- SEBI has said that monitoring of IPO funds will continue till 100 per cent of the amount is utilised, instead of 95 per cent.
- SEBI has also imposed a limit on the sale of shares of existing shareholders of companies through offer for sale in IPO. Under this, shareholders who have more than 20 percent stake in a company, they will be able to sell only half their shares through offer for sale. Apart from this, investors who have less than 20 percent stake will be able to sell only 10 percent of the total holding in the offer for sale in the IPO.
- It has also been decided to increase the lock-in period for anchor investors to 90 days. This rule will be applicable to all the issues opened on or after 1st April 2022. In the 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 the notification in the official gazette.
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