26, February, 2024
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SEBI Enhances Scrutiny as IPO Boom Raises Concerns of Misleading Information

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India’s Securities and Exchange Board of India (SEBI) is intensifying its examination of corporate documents submitted by companies looking to go public, responding to the surge in initial public offerings (IPOs) in the Indian market.

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With nearly 50 companies launching public issues in 2023 and eight more in the current year, an additional 40 companies await SEBI’s approval.

Concerns around Fundraising SEBI has taken a proactive stance by sending back at least six public offer documents, expressing concerns over companies potentially providing misleading information about their fundraising intentions. The regulator is particularly focused on scrutinizing how companies plan to utilize the funds raised through IPOs.

Exploiting the Caveat A notable concern identified by SEBI is the exploitation of a caveat wherein companies claim IPO funds will be allocated to retire debt. This practice allows companies to circumvent the law, reducing the share lock-in period from three years to 18 months. The lock-in period denotes the duration during which stocks cannot be redeemed. SEBI is now seeking a detailed breakdown of whether IPO proceeds are genuinely being used to settle debts, adding complexity to disclosure requirements.

Earlier revelations from SEBI indicated an investigation into three IPOs for alleged subscription inflation, prompting the regulatory body to develop measures to prevent such misconduct.

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As the IPO market continues to flourish, SEBI’s heightened scrutiny aims to ensure transparency, safeguard investor interests, and maintain the integrity of the Indian financial landscape.

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