Sebi on Tuesday tightened norms governing initial public offerings (IPOs) — it imposed a ceiling on proceeds to be utilised for unidentified acquisitions, set limits on offer for sale by selling shareholders and extended the lock-in period for a section of anchor investors.

The measures are largely in line with a discussion paper released by the regulator in November.

If one of the objects of IPO is to fund acquisition or inorganic growth but the target has not been identified, the amount for such purpose and for general corporate purpose (GCP) cannot exceed 35 per cent of the total sum being raised

Registered credit rating agencies have been given the task of acting as a monitoring agency instead of scheduled commercial banks and public financial institutions (PFI). The monitoring will be done for 100 per cent utilisation of issue proceeds instead of the prescribed limit of 95 per cent.

Sebi has prescribed certain conditions for OFS (offer for sale) in IPO where draft papers are filed by an issuer without a track record.

There will be a limit on the number of such shares that can be offered in a public float, whether it is individually or with persons acting in concert.

Those holding more than 20 per cent of pre-issue shareholding of the issuer, cannot sell more than 50 per cent of their pre-issue shareholding.

In cases of less than 20 per cent shareholding, the offer for sale cannot exceed more than 10 per cent of their pre-issue shareholding .

Lock-in rules

Sebi also took steps on the lock-in period applicable for anchor investors.

Existing lock-in of 30 days will continue for 50 per cent of the portion allocated to anchor investors and for the remaining portion, a period of 90 days from the date of allotment will be applicable for all issues opening on or after April 1, 2022.

The capital markets watchdog also made changes to price band. It said the difference between the floor price and the upper end of the price band will have to be at least 105 per cent.

This will be applicable to all issues opening on or after notification in the official gazette.