5 IPO Related Norms That Have Been Tweaked By Sebi

To ensure that IPO frenzy does no harm and is properly regulated, SEBI on Tuesday has tightened the noose on the norms for companies' going for listing. The present IPO offers shall also continue through the year 2022 with some of the major mega IPOs due in the coming new year.

So here are put some of the changes made to IPO offering norms:

Decision on setting of price band: Sebi tweaked the price band norms. The difference between the floor price and the upper price band shall be at least 5%. Price band offered has been very low.

Bifurcation of retail investors' quota in an IPO: 1/3rd of the retail investors quota will henceforth be reserved for investors with an application size of over Rs. 2 lakh and below Rs. 10 lakh. The rest will be offered to investors with an application size of more than ₹10 lakh.

Anchor lock in period: Anchor lock in which is the lock in set for institutional investors in a stock has been extended such that there is no abrupt offloading of shares in the IPO shares. The lock in period has been extended to 90 days for preventing any major volatility and impact on retail investors. Remember this is applicable for 50% allocation to these anchor investors.

Disclosures in respect of deployment of share sale proceeds: For unclear acquisitions, the company cannot use more than 25% of the IPO proceeds. Also, for oher endeavours there has been placed a cap at 35%. Further rating agencies will be given a task to monitor the deployment of these funds.

Quantum of shares which the shareholders can offload on the first trading day of the IPO scrip: Large shareholders with over 20% stake cannot divest their holding on the listing day. But a maximum of 50% holding can be divested. This is also been sought as the new age companies' with no profitability and promoter discretion may result in panic among retail investors and hurt their confidence.

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