Sebi likely to tighten monitoring norms for IPO and QIP proceeds

Sebi Considers Lowering Threshold for Monitoring Agencies

Indian companies may soon face stricter regulations regarding monitoring agencies, as the Securities and Exchange Board of India (Sebi) examines the possibility of lowering the threshold for appointing these agencies.

Current Regulations and Proposed Changes

• Currently, companies with fresh mop-up exceeding Rs 100 crore are required to appoint a Sebi-registered monitoring agency.
• Sebi is considering lowering this threshold to Rs 50 crore or removing it altogether, which would expand oversight to smaller issuers.

Oversight Issues and Proposed Solutions

Sebi is looking to address gaps in the current framework, which has led to delayed or incomplete disclosures.

• Monitoring agencies submit quarterly reports to companies, which are then responsible for filing them with stock exchanges within 45 days.
• Companies have often delayed or failed to submit reports, leaving investors with limited visibility on fund use.
• Sebi's expert group proposes allowing MAs to submit reports directly to stock exchanges, reducing the scope for interference.

Stricter Action Against Non-Cooperative Companies

Sebi is considering stricter action against companies that fail to cooperate with monitoring agencies.

• Under the current framework, a listed company can be fined Rs 50,000 for non-cooperation.
• Sebi may initiate further regulatory action if non-cooperation persists.

Impact on SME IPOs and Large Issuers

Recent data suggests the impact on large issuers may be limited, with only three mainboard IPOs in 2025 having a fresh issue size of less than Rs 100 crore.

• Sebi had already lowered the threshold to Rs 50 crore for SME IPOs, effective from March 2025.
• Investment bankers predict a sizable number of firms may raise less than Rs 100 crore via fresh issues in 2025.

Monitoring Reports and Disclosures

Monitoring reports typically include the status of fund deployment against stated objects of the issue.

• The company's board and senior management are required to provide formal comments on the findings.
• Disclosures must be made public on the company's website and through stock exchanges.

Regulatory Action and Impact

Sebi's proposed changes aim to ensure timely disclosure and reduce the scope for interference by listed entities.

• The reports generated by MAs will provide investors with better visibility on the use of funds.
• Stricter action against non-cooperative companies will promote transparency and accountability.