IPO proceeds: SEBI bats for agency to check usage


The Securities and Exchange Board of India proposes to make the appointment of a monitoring agency to oversee deployment of the proceeds in public issues mandatory irrespective of the issue size.

Earlier, a monitoring agency was mandatory only for public issues of over ?500 crore.

This is being done to keep the Issue of Capital and Disclosure Requirements Regulations in sync with the Companies Act which has provisions related to deviations in the utilisation of issue proceeds.

SEBI has brought down the frequency of report submission by the monitoring agency from half-yearly to quarterly till the funds are fully utilised. The report now has to be disclosed in a stock exchange filing. Earlier, this was not required.

Updates at regular breaks

With this, shareholders would receive regular updates and since any change in object requires their prior nod, dissenting shareholders would get an exit opportunity.

SEBI has also introduced categorisation of these reports in case of deviation of funds from the stated objects in the offer document.

The monitoring agency has to grade the deviation on the two-digit scale. The first digit indicates the presence or absence of deviation, while the second digit is for extent of deviation.

Stock exchanges have to prominently disseminate list of monitoring agency reports in separate lists based on first digit of categorisation.

Comments from panel

The audit committee and the board/ management of companies have to provide their comments on the deviation pointed out. As of now, this is not required.

Though no timeline for report submission by the monitoring agencies exists now, SEBI has prescribed 45 days from the end of every quarter to the stock exchanges.

A sub-committee within of board headed by an independent director has to oversee the monitoring. As of now, this is not required.

SEBI had recently limited the amount that can be earmarked for ‘General Corporate Purpose’ to 25 per cent of issue size.


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