SEBI amends regulations to boost launch of IPO by companies
Upstox
2 min read • Updated: March 17, 2024, 5:20 PM
Summary
SEBI has done away with the need for a 1% security deposit in public issue or rights offerings of shares. Promoter group entities and non-individual shareholders holding more than 5% of post-offer equity share capital will also be allowed to contribute towards the minimum promoters' contribution (MPC) without being identified as promoters.
Capital market regulator the Securities and Exchange Board of India (SEBI) has amended the Issue of Capital and Disclosure Requirements Regulation 2018 in a bid to boost ease of doing business for companies going for an IPO or fund-raising through public offer.
As per an official notification dated March 15, SEBI has done away with the need for a 1% security deposit in public issue or rights offerings of shares. Further, promoter group entities and non-individual shareholders holding more than 5% of post-offer equity share capital will be allowed to contribute towards the minimum promoters' contribution (MPC) without being identified as promoters.
To facilitate the process for companies utilising convertible securities for fundraising, equity shares resulting from the conversion of compulsorily convertible securities will now be considered for meeting the MPC requirement. These equity shares must be held for a year before filing the Draft Red Herring Prospectus (DRHP).
The amendment also simplifies the process for adjusting the size of an offer for sale (OFS). Now, the increase or decrease in the size of OFS requiring fresh filing will be based on only one factor— either the issue size in rupees or the number of shares as disclosed in the draft offer document.
SEBI has also introduced flexibility for extending the bid/offer closing date in response to force majeure events by reducing the requirement to just one day. In the past, extending the closing date required a minimum of three days.
These amendments are aimed at streamlining the regulatory framework governing IPOs and fundraising activities, making it more conducive for companies to access capital markets.
SEBI has been exploring ways to reform the IPO process for some time. The market regulator was reportedly in the process of implementing artificial intelligence (AI) for the initial scrutiny of DRHPs. According to media reports, SEBI's Whole Time Member, Ananth Narayan, mentioned that AI was proving useful for vetting publicly available documents. In another development, the capital market regulator also approved the launch of the beta version of the T+0 settlement on an optional basis from March 28. SEBI announced the new and optional settlement cycle on March 15 after its board meeting.