Under the new norms, large shareholders (with more than 20% stake) in the company cannot sell more than 50% of their stake as part of an offer for sale (OFS). This becomes relevant because in startups, private equity investors are the major shareholders and there is no identifiable promoter. Existing rules allow these large shareholders to exit completely.
To improve disclosure criteria, companies can allocate only 25% of the proceeds of an issue for acquisitions where a target has not been identified. The total allocation for undisclosed acquisitions and ‘general corporate purpose’ cannot exceed 35%. Issuers must appoint a credit rating agency to monitor and report the end use of funds.
In a board meeting held on Tuesday, SEBI said anchor investors will have to hold half their stake for at least 90 days in addition to the existing requirement to stay in the investment for a month. Shares of companies such as Zomato and Paytm fell a month after listing after they were sold by anchor investors at the end of the lock-in period.
Non-institutional investors will now be divided into two categories. One-third of the issue will be reserved for those investing between Rs 2 lakh and Rs 10 lakh and the remaining two-third will be for those who invest Rs 10 lakh and above in the issue. The move will prevent small investors from getting squeezed. To ensure that companies do not get too ambitious in their pricing, SEBI has asked them to have an upper price band which is at least 105% higher.
SEBI Chairman Ajay Tyagi It was emphasized that the regulator has no intention of controlling the IPO prices in any way. “Price discovery is a function of the market and so does it globally,” he said at a media briefing after the board meeting. The regulator also approved the introduction of Special Situation Fund (SSF) which will invest only in bad debt assets.
SSF will be offered as a sub-category under Category-I Alternative Investment Fund (AIF). The move will greatly aid the operations of the National Asset Reconstruction Company, which will receive a major chunk of bad loans from public sector banks.
To improve corporate governance in listed companies, the regulator has barred them from appointing directors who were earlier dismissed by shareholders without the approval of shareholders. In a result of its tussle with PNB Housing over valuation of shares in a preferential issue to a new owner, SEBI said that preferential issues would require an independent valuation when it would result in a change in ownership.
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