- Security and Exchange Board of India (Sebi) is going to restrict the Initial Public offering norms after the growing arbitrary of key shareholders.
New Delhi :- After a board meeting held on Tuesday, Sebi said that the companies whose key shareholders sell their holding soon after their listing is going to be restricted by chances in IPO norms. It all followed a spate of issues in which companies raised funds for questionable reasons and investors dealt with volatility.
Ajay Tyagi, Sebi Chairperson, asserted that regulators have no control over IPO pricing and the price discovery is a global function of the market.
Now company shareholders will be able to sell not more than 50% of its holding with over 20% stake. This norm facilitates these large shareholders to fully exist as in a startup, private equity investors have a large share in companies than an identifiable promoter. The meeting also discusses how companies set IPO bands, how disclosures surrounding company share sales are made and when anchor investors can sell shares.
The disclosure mentioned that companies can only use 25% of its merger and acquisitions in the end-use of IPO funds. The issuersneed to appoint a credit agency to look after the end-use of funds as the unidentified and general corporate purpose can’t exceed more than 35%.
The Lock-in period of anchor investors has also been increased to 90 days to prevent sharp price volatility and loss of retail investors. Likewise, shares of Zomato and Paytm fell soon after listing as anchor investors sold stakes at the end of the lock-in period.
For non-institutional investors (NIIs), a third of the issue will be reserved for investors who invested between 2-10 lakhs and the remaining two-thirds will be granted to investors who invested above 10 lakhs.In the same breath, the regulator approved the establishment of Special Situation Funds (SSF) that only invest in bad debt assets.
Story By : Rupali Sharma