SEBI TWEAKS IPO RULES - GOOD MOVE

about 29 days ago
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The much-awaited norms on the IPOs came in today evening, just before the year is due to end. Those who made it before this, will be having a glee on their face, feeling they made it before SEBI woke up while the others, waiting in the sidelines, will have to rework and look for loopholes to keep this party going.

Based on the discussion paper released on 16th Nov, SEBI today tweaked some rules which were causing a lot of discomfort to the retail investors. Here goes…

Conditions for Objects of the Issue:

Where the issuer company in its offer documents, set out an object for future inorganic growth but has not identified any acquisition or investment  target,  the  amount  for  such  objects  and  amount  for general corporate purpose (GCP) shall not exceed 35% of the total amount being raised.

Where the  issuer company  has  not  identified  acquisition  or  investment  target,  as mentioned in objects of the issue in the draft offer document and the offer document, shall not exceed 25% of the amount  being raised by the issue.

Such limits will not be applicable where proposed acquisition or strategic investment  object   has   been   identified   and   suitable   specific disclosures  about  such  acquisitions  or  investments  are  made  in the draft offer document.

Conditions for offer for Sale (OFS) to public in an IPO where DRHP is filed by issuer without track record:

Currently, during an offer-for-sale (OFS) shareholders (promoters, anchor investors) can exit part or their entire holding and that rule has now been tweaked –

Shareholders, who hold more than 20% stake, cannot exit their entire holding on listing day but only 50% of their holding.

Those holding less than 20% of pre-issue shareholding of the issuer, shall not exceed more than 10% of pre-issue shareholding of the issuer

Monitoring Agency and reporting on utilization of issue proceeds:

Credit rating agencies will monitor usage of funds till 100% instead of 95%

Amount for general corporate purpose (GCP) shall also be brought under monitoring and utilisation of same shall be disclosed in monitoring agency report.

Monitoring agency report shall be placed before audit committee for consideration on a quarterly basis instead of on an annual basis.

Price Band:

In case of book built issues, a minimum price band of be at least 105% of the floor price shall be applicable for all issues.

Lock-in for Anchor Investors:

The existing lock in of 30 days shall continue for 50% of  the  portion  allocated  to  anchor  investor  and  for  the  remaining portion, lock in will be of 90 days from the date of allotment.

Well, many are complaining that this is too late, akin to bolting the door of the stables after the horses have run out. But then if these IPOs had not happened, these gaps would have never come out. You need poverty to feel rich; these new norms are something like that….

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