STRICTER IPO proceeds come under Sebi watch

Firms will now need to appoint a monitoring agency for IPO size of `100cr

In order to prevent the misuse of money raised from public offers, the Sebi on Wednesday decided to strengthen the process of monitoring the utilisation of issue proceeds.

Announcing a slew of measures to deepen the securities and commodity markets, the capital market regulator also allowed non-banking finance companies (NBFCs) with a net worth of over `500 crore to invest in primary market issues, a move that will reduce the dependence on FPIs.

The board of Sebi, which met for the first time under its Ajay Tyagi (in pic), who took charge in March made it mandatory for companies to appoint a monitoring agency to oversee the utilisation of IPO proceeds where the offer size is more than `100 crore.

Earlier, the rule was applicable to only those companies that raise more than `500 crore.

“Primary market offers with small size was likely to be siphoned-off or misused. This along with other stringent provisions in the Companies Act 2013 requiring shareholders approval for changing the objects or providing exit opportunity to shareholders along with other mechanisms are effective enough to ensure compliance,” Mr Tyagi said adding that maintaining market integrity at all cost is one of the primary objective of Sebi as any shortcoming could hamper investor confidence and fund raising activity in the Indian market.

Apart from making it mandatory for appointment of monitoring agency, the frequency of submission of monitoring agency report has also been enhanced from half yearly to quarterly. Firms will now need to file this report within 45 days from the end of the quarter in conjunction with the submission of the quarterly results besides uploading it in their websites for wider dissemination.

The Sebi board also approved the proposal for inclusion of systematically important NBFCs registered with the RBI having a net worth of more than `500 crore in the category of QIBs.