The Securities and Exchange Board of India (SEBI) has introduced amendments to the SEBI (Issue of Capital and Disclosure Requirements) Regulation 2018, aiming to streamline processes for companies preparing for initial public offerings (IPOs) or fundraising.
Removal of Security Deposit Requirement
SEBI's amendments include the removal of the 1% security deposit requirement for public/rights issues of equity shares. Additionally, promoter group entities and non-individual shareholders holding more than 5% of post-offer equity share capital can now contribute to the minimum promoters’ contribution (MPC) without being classified as promoters, as per a report by Moneycontrol.
Consideration of Equity Shares from Conversion
Equity shares resulting from the conversion of securities held for at least 12 months before the filing of the draft red herring prospectus (DRHP) will now be considered for meeting the MPC requirements.
Simplified Offer for Sale (OFS) Criteria
SEBI stated that any increase or decrease in the size of an OFS requiring fresh filing will be based on either the issue size in rupees or the number of shares disclosed in the draft offer document.
Extension of Bid/Offer Closing Date
The amendments also allow for a one-day extension of the bid/offer closing date in case of force majeure events, compared to the previous requirement of three days.
SEBI's Continued Efforts for Process Improvement
SEBI has been actively exploring ways to enhance the IPO process. Earlier reports indicated that the regulator was utilizing artificial intelligence (AI) for the initial scrutiny of DRHPs. SEBI's whole-time member, Ananth Narayan, highlighted the utility of AI in vetting publicly available documents. However, for private documents, an in-house machine learning language module is required for further verification.
Investor Protection Measures
In light of potential frauds, SEBI has cautioned investors about fake entities that promise stock market access without requiring official KYC. These entities pose a risk to unsuspecting investors, and SEBI advises caution when dealing with such offers.
