Prohibition On Misuse Of IPO Funds: SEBI Chairman
Prohibition on misuse of IPO funds, SEBI will not have any role in determining the price band: Chairman.
Companies will no longer be able to make arbitrary use of the money raised through IPO. They will have to invest the money in the same items which they have mentioned in the fundraising document.
Capital markets regulator SEBI in its last board meeting this year has taken some such very important decisions.
Taking an important decision on Tuesday, the SEBI board has approved the proposal for some changes in the existing rules for the use of funds raised from Initial Public Offer (IPO). Only for any future business acquisition.
Before closing any scheme for mutual funds, it has been made mandatory for the approval of the majority of its unitholders.
If the majority of the unitholders do not wish to, the fund scheme will continue.
SEBI decided in the meeting that only a maximum of 25 percent of the money raised from the IPO could be kept for future acquisitions
. SEBI has clarified that this rule will not be applicable to companies that have given information about a particular acquisition in the form submitted in respect of IPO.
Apart from this, companies will keep a maximum of 35 percent of the total accumulated amount from the IPO for normal operating business.
SEBI will also be able to monitor the amount which will be kept reserved by the company in this item.
SEBI Chairman Ajay Tyagi, who was informed about the decisions of the board, said that SEBI does not intend to interfere in the IPO prices.
The work of fixing the price of the shares should be done through the market. Under this, the lock-in period of anchor investors has been increased to 90 days.
In the arrangement of offer of shares through book building, an amount (minimum) of 105 percent of the floor price shall be considered as the price band.
That is, once the book-building process is officially notified, companies will not be able to change the price band much.
Here are the important changes
Only 25 percent of the IPO raised will be kept for future acquisitions and a maximum of 35 percent for normal operating purposes.
Anchor investors will have a 90-day lock-in period under the offer for sale in an IPO.
Mutual Funds Permission of the majority of the unitholders will have to be taken before closing the schemes.
Special Situation Fund will be formed for investment in distressed properties, their minimum capital will be Rs 100 crore.
