After the massive irregularities in SME IPO, SEBI has proposed to tighten the rules. The market regulator has issued a consultation paper for this on Tuesday, 19 November. Actually, SEBI has seen a pattern of manipulation in the IPO of some small and medium companies i.e. SMEs. The market regulator wants to stop this manipulation.
Let us tell you that SEBI Chairperson Madhabi Puri Buch had warned of possible manipulation in the shares of SME companies. In March this year, she had described the surge in valuations in many sectors of the market as a bubble.
New proposals to make the listing process more robust
In the new proposal, SEBI is considering increasing the size of investment in SMEs IPO to make the listing process more robust. It is proposed to increase it to at least Rs 2 lakh, let us tell you that till now this amount is Rs 1 lakh investment. Talking about the NII category, it is proposed to divide it into two parts up to Rs 10 lakh and more than Rs 10 lakh. SEBI is planning to impose some restrictions on Offer for Sale (OFS). In which OFS should not be more than 20% of the issue.
Plan to appoint agency for monitoring
SEBI is planning to appoint a monitoring agency for issues of more than Rs 20 crore. At the same time, for smaller issues, it is also considering making auditor certification mandatory for the use of funds.
There will be strictness on promoters too
Along with this, SEBI has also presented proposals on the sale of shares. Such as the proposal of lock-in for the promoter on exiting the shares. Plan to make the minimum promoter contribution (MPC) up to 5 years. Along with this, the promoter will sell the additional stake in two phases, 50% after 1 year of the issue, the remaining 50% after 2 years.
There was a ruckus due to the IPO of Resourceful Automobile
Questions have been raised about SMEs IPO for a long time. But SEBI became even more cautious when Resourceful Automobile’s IPO came in the market some time ago. This issue was subscribed 400 times. This surprised everyone. A company with only 2 showrooms and 8 employees and a Yamaha dealership asked for ₹12 crore from investors, but received bids of Rs 5,022 crore.
Resourceful Automobile’s subscription sparked a debate on social media platforms. Considering all these things, SEBI has introduced a new proposal to make the SME IPO listing process more robust.
