SEBI clears amendments to various regulations, tightens rules for IPO

The Securities and Exchange Board of India (SEBI) on Tuesday cleared a slew of amendments to various regulations and tightened the rules for initial public offerings (IPOs).
 
For an offer for sale (OFS) in an IPO, the shares offered by selling shareholders, holding more than 20 per cent of the pre-issue shareholding of the issuer, can not exceed more than 50 per cent of its pre-issue shareholding.
 
For shares offered by shareholders holding less than 20 per cent of pre-issue shareholding, the shares offered cannot exceed more than 10 per cent of pre-issue shareholding of the issuer.
 
The market regulator cleared the proposals during its board meeting on Tuesday.
 
Besides, the regulator also increased the lock in period for anchor investors. "The existing lock in of 30 days shall continue for 50 per cent of the portion allocated to anchor investor and for the remaining portion, lock in of 90 days from the date of allotment shall be applicable for all issues opening on or after April 01, 2022," it said.
 
If a company in its Draft Red Herring Prospectus (DRHP) sets out an object for future inorganic growth but does not identify any acquisition or investment target, then the amount for such objects and amount for general corporate purpose cannot not exceed 35 per cent of the total amount being raised, the regulator said.
 
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If a company has not identified acquisition or investment target as objects in the DRHP and the offer document, then the amount for such objects cannot exceed 25 per cent of the amount being raised.
 
"Above limits shall not apply if the 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 and the offer document at the time of filing of offer documents," SEBI said.
 
Sebi has also made changes to the price band. For book built issues, a minimum price band of at least 105 per cent of the floor price shall be applicable for all issues.
 
The regulator has also revised the allocation methodology for non institutional investors (NIIs). For book built issues opening on or after April 01, 2022, one-third of the portion available to NIIs will be reserved for applicants with application size of more than 2 lakh rupees and up to 10 lakh rupees, while two-third of the portion available to NIIs will be reserved for applicants with application size of more than 10 lakh rupees.
 
Besides, companies will need to submit a valuation report from a registered independent valuer in case of change in control or allotment of more than 5 per cent of post issue fully diluted share capital to an allottee.

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