Sebi makes it easier to raise funds via IPOs
MUMBAI: The capital markets regulator on Thursday eased disclosure norms for initial public offerings (IPOs) and tightened the definition of ‘promoter group’ to prevent fraudulent transactions.
IPO issuers will now be allowed to announce the price bands two days before the issue opens for subscription instead of the previous five days, the new Securities and Exchange Board of India (Sebi) guidelines said. The new norms include ‘immediate relatives’ within the definition of promoter and promoter groups.
Sebi also said that financial disclosures will need to be made for three years, compared with the earlier five years. Besides, institutional investors, such as alternative investment funds, will be able to contribute up to 10% of what the promoter is required to offload in an IPO.
The easier disclosure norms are aimed at encouraging genuine firms to raise funds through the capital markets route, while the stricter definition of promoter group will ensure that IPOs are not misused to evade taxes.
“The move to permit issuers to announce the IPO price band two days before the issue opening date will enable them to budget for volatility in both the domestic and global markets,” said Yogesh Chande, partner, Shardul Amarchand Mangaldas. “The amendments in ICDR (Issue of Capital and Disclosure Requirements) Regulations relating to rights issue and public issue will simplify the disclosures in the offer documents, which was otherwise a tedious process. These changes will ease the manner and the time generally taken to raise funds from the public.”