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Mumbai: India’s markets regulator proposed tightening rules on how companies can spend cash raised through initial public offerings and how quickly large investors can exit, a move aimed at protecting smaller shareholders in a new age. The buyout comes in a flurry of listings by technology firms that are promoting the country’s equity markets at record highs.
According to a consultation paper published late Tuesday, the Securities and Exchange Board of India proposed limiting earnings to a maximum of 35% for acquisitions and unspecified strategic investments. It also proposed a longer lock-in for so-called anchor investors to prevent quick withdrawals after listing.
The proposals from the capital market watchdog – whose comments have been sought by November 30 – come as India gears up for a record year for an IPO and the central bank’s decision to impose limits on borrowers seeking to buy shares of a new listing. Follow. Paytm is set to launch this week after a $2.4 billion offering was the largest in the country, while others like beauty startup Nykaa nearly doubled on its first trading day.
These are some of the changes proposed by the regulator:
- Up to 35% of the IPO issue can be used for inorganic growth initiatives and general corporate purpose
- The regulator said technology companies often need to raise funds to expand into new markets, acquire clients or other firms – objectives that often fall under the category of ‘financing inorganic growth’ that pose uncertainty to investors. generate, the regulator said
- For IPOs of firms with unidentified promoters, sale of shares by significant shareholders will be limited to 50% of their pre-issue holdings. Any investor holding more than 20% will be considered a ‘significant shareholder’.
- Such shareholders will face a lock-in period of six months after the share sale. SEBI said, this may include venture capital funds, alternative investment funds
- At least 50% of the anchor investors should be those who are willing to stay in the investment for at least 90 days. This compares with currently 30 days.
SEBI’s proposals follow the Reserve Bank of India’s decision last month, with effect from April 1, 2022, up to Rs 10 million per borrower on lending for investment in new listings. ,bloomberg
Read also: SEBI fines Kotak Mahindra AMC Rs 50 lakh for violating regulatory norms
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