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The Securities & Exchange Board of India proposed to tighten the rules governing IPOs with a view to ensure more transparency and accountability. The capital markets regulator has sought public comments on the changes proposed (IPO norms) by it till the end of this month, after which it will firm up the rules. The proposal comes at a time amid a record Rs. 1 trillion plus mop up through IPOs this year, most of which came from new age and loss-making companies.
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SEBI has proposed for a cap on the amount that companies and especially start-ups can raise for inorganic growth initiatives and on the quantum that the existing shareholders can offload in the IPO. SEBI has also proposed to raise the lock-in period for anchor investors and has also called for the monitoring of the IPO proceeds. Anchor investors are those institutional players who subscribe to Initial Public Offers (IPOs) just a day before the issue opens for public. They are provided confirmed allotment as they put in large bids. Hence the SEBI proposal focuses on 4 key areas:
Let’s look at the changes proposed by SEBI in detail-
If these changes are implemented, then it can have the following impact:
SEBI has proposed these IPO norms so that the regulations on capital and disclosure requirement can be tightened as India witnesses record fundraising via IPOs. SEBI had issued a consultation paper on November 16 and notified four key areas which require changes. SEBI has provided time till the end of this month for public comments.
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