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SEBI tightens IPO norms.
Market watchdog SEBI has come out with new norms for IPOs after a spate of new issues saw companies raise funds for sketchy and ambiguous statement of resons for the same leading to the investors had to deal with high volatality after key promoters exit with their holdings’ sale immediately after the listing.
Now SEBI says that the large shareholders in the company, with over 20 % stake, cannot sell more than 50 % of their holdings under OFS. PEs normally exit after the IPOs. Now SEBI proposes to ask Rating agencies to monitor the end-use of IPO funds.
To improve disclosure norms companies can allot only 25 % of an issue’s proceeds for acquisitions where a target has not been identified.Further ‘general corporate purpose’ cannot be more than 35 %. Issuers have to appoint a Credit rating agency to monitor the end-use of funds.Besides, anchor investors have to hold half their holdings for at least 90 days in addition to the present stipulation of staying invested for a month.
SEBI noted that the share prices of Zomato, PayTm and all fell drastically after the anchor investors sold their stake after the lock-in period.
But SEBI says it has no plan to control pricing of IPOs and would like to leave it to the discovery of the markets, as is the case globally.
Investors are advised to be extremely cautious while investing in IPOs as many IPOs like Star Health, Shriram Properties, PayTm and many more have taken the investors for a ride. So make informed investments. For all market related assistance, please feel free to get in touch with Goodwill Wealth Management P Ltd.
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