SEBI in its board meeting held on 28th December made a slew of changes. Especially tightening the rules for the IPO process. Here are some of the key highlights from the board meeting.
Companies that are going for IPO with an objective of future inorganic growth but have not identified any acquisition or investment target, the amount for such objects and for general corporate purpose should not exceed 35% of the total amount being raised.
Further, if the company has earmarked an amount towards such objects but has not identified an acquisition or investment target, as mentioned in objects of the issue in the IPO Prospectus (DRHP) should not exceed 25% of the amount being raised by the issuer.
On the OFS (Offer for sale): If existing shareholders are selling their shares:
Shares offered for sale by selling shareholders, holding more than 20% of pre-issue shareholding should not exceed more than 50% of their pre-issue shareholding.
Shares offered for sale by selling shareholders, individually holding less than 20% of pre-issue shareholding should not exceed more than 10% of the pre-issue shareholding.
Monitoring Agency and reporting on utilization of issue proceeds:
Credit Rating Agencies (CRAs) registered with SEBI will be permitted to act as Monitoring Agency instead of Scheduled Commercial Banks (SCBs) and Public Financial Institutions (PFI).
With monitoring continuing until 100% if the IPO proceeds are utilized, as opposed to earlier 95%.
Amount raised for General Corporate Purposes (GCP) too will be brought under monitoring and utilization if this should be disclosed in the monitoring agency report.
The monitoring agency will have to submit its report on a quarterly basis instead of on an annual basis.
Lock-in for Anchor Investors: From April 1, 2022, onwards 50% of the portion allocated to anchor investors will be locked-in for 30 days. While the remaining 50% portion will be in lock-in for 90 days from the date of allotment.
Revised allocation methodology for Non-Institutional Investors (NIIs):
For book built issues from April 1, 2022, onwards the allocation in the NII category will be as follows:
1/3rd of the portion available for NIIs will be reserved for applicants with an application size of more than two lakh rupees and up to ten lakh rupees.
While 2/3rd of the portion available for NIIs will be reserved for applicants with an application size of more than ten lakh rupees.
Also, allotment of shares in the NII category will be on draw of lots, same as how the allotment process is currently carried out in the retail investor category.
Another big decision that SEBI took was making Mutual Fund unit holders consent must before winding-up of MF schemes. This is dude to the Franklin Templeton issue where Franklin wound up those 6 debt schemes without investor consent because of the lack of a precedent.
“The trustees shall 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. In case the trustees fail to obtain the consent, the scheme shall open for business activities from the second business day after publication of results of voting.”
Along with this the board also made changes to the issue of preferential shares. Amendments to AIF Regulations, to introduce Special Situation Fund which will invest only in stressed assets, amongst others. You can check out the press release here.