SEBI tweaks share sale norms for IPOs

‘Rating agencies to track use of funds’

The Securities & Exchange Board of India (SEBI) on Tuesday approved amendments to a slew of regulations to tighten the Initial Public Offering (IPO) process and norms governing utilisation of IPO proceeds by promoters.

In its board meeting, SEBI approved conditions for sale of shares by significant shareholders in the Offer-For-Sale (OFS) process via an IPO and has extended the lock-in period for anchor investors to 90 days.

Shares offered for sale by shareholders with more than 20% of pre-issue shareholding of the issuer, should not exceed 50% of their holding. If they hold less than 20%, then the offer for sale should not exceed 10% of their holding of the issue.

SEBI said the existing lock-in of 30 days for anchor investors would continue for 50% of the portion allocated to such investors. 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.

These changes are as per proposals recommended by SEBI’s Primary Market Advisory Committee of the markets regulator.

The regulator also approved a cap on IPO proceeds earmarked for acquisitions of unspecified targets and from now, funds reserved for general corporate purposes will be monitored by credit rating agencies.

If the issuer company sets out an object for future inorganic growth but has not identified any acquisition target in its offer documents, the amount for such objects and the amount for general corporate purpose shall not exceed 35% of the total amount being raised, SEBI said.

The limit will not apply if the acquisition object has been identified and disclosures are made in the offer documents.

The regulations come amid several new-age technology firms lining up with IPO applications, several intending to allow an exit to private equity investors through the OFS route.

Credit rating agencies registered with the SEBI will be permitted to act as monitoring agencies instead of scheduled commercial banks and public financial institutions, SEBI said.

“Such monitoring shall continue till 100% instead of 95% utilisation of issue proceeds as at present,” it said.

Winding up MF schemes

Winding up of mutual fund schemes would now be possible only after the consent of majority unitholders.

“Trustees will have to obtain consent of the unitholders by simple majority of the unitholders present and voting on the basis of one vote per unit held and publish the results of voting within 45 days of the publication of notice of circumstances leading to winding up,” it said. If trustees fail to obtain consent, the scheme should be open for business from the second business day after publication of results of voting, it added.

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