The Securities and Exchange Board of India (SEBI) may approve a number of new norms at its upcoming board meeting on December 18, including those for SME companies wanting to go public, angel funds and unpublished price sensitive information (UPSI).
SEBI may double or quadruple the minimum application size in SME IPOs to ₹2-4 lakh, allowing only informed investors with higher risk taking appetite to apply.
Issuers will be eligible to make an initial public offer only if the issue size is more than ₹10 crore and only if the operating profit is ₹3 crore for at least two out of three financial years preceding the application.
Lock-in on minimum promoter contribution may be increased to five years from three years. Minimum allottees in such IPOs may be increased to 200 from existing 50. The appointment of monitoring agency will be mandatory if fresh issue size is higher than ₹20 crore.
SEBI recently cancelled the SME IPO of Trafiksol ITS Technologies and asked the company to refund the money to investors for alleged questionable dealings with a ‘shell entity’.
UPSI expansion
SEBI may expand the ambit of UPSI by including restructuring plans, proposed fundraising activities, and one-time bank settlements. Developments in corporate insolvency proceedings that include approval of resolution plans, one-time settlement in relation to loans and borrowings from banks or financial institutions will be included.
According to a study by SEBI on material events disclosed to the stock exchanges, companies were seen to be categorising only the items explicitly mentioned in the PIT Regulations as UPSI, and not complying with the law in spirit.
The regulator may suggest sharp hike in the net worth and provide more clarity on the roles and responsibilities of investment bankers. Bankers with net worth of at least ₹50 crore will fall under Category 1 and they will be allowed to undertake all activities that fall under SEBI’s ambit. Those with net worth of Rs 10 crore will fall under Category 2 and will not be allowed to handle mainboard issues.
Angel funds
SEBI may approve a proposal allowing only accredited investors to invest in angel funds. Such investors have to meet a net-worth criteria verified by a third-party accreditation agency. This will allay concerns regarding investors without the necessary risk appetite, making investments in start-ups through angel funds.
Angel funds will conduct their first close, by on-boarding minimum five accredited investors, within 12 months from the date of SEBI communication for taking their private placement memorandum on record. Existing angel funds will get a year to meet the accredited investor requirement.
Minimum investment by an angel fund in a start-up may be lowered to ₹10 lakh from ₹25 lakh and the maximum investment limit will be raised to ₹25 crore from ₹10 crore. The 25 per cent diversification limit for angel funds will be done away with.
SEBI may tweak rules related to appointment of public interest directors on the boards of market infrastructure institutions such as stock exchanges and clearing corporations.
Pointers
SEBI may double or quadruple the minimum application size in SME IPOs to ₹2-4 lakh
May expand the ambit of UPSI by including restructuring plans, proposed fundraising activities, and one-time bank settlements
Allow only accredited investors to invest in angel funds
Tweak rules on appointment of public interest directors on the boards of market infrastructure institutions
