SEBI Amends Rules To Boost IPO Process

To facilitate ease of doing business for companies planning IPOs, SEBI has said any change in the size of offer for sale requiring fresh filing will be based on only one of the criteria -- either issue size in rupee or number of shares. Further, promoter group entities and non-individual shareholders holding more than 5% of the post-offer equity share capital can be permitted to contribute towards the shortfall in minimum promoters' contribution without being identified as a promoter, according to a notification issued by SEBI.

Companies promoted by entrepreneurs often have several rounds of funding prior to listing their equity shares on the stock exchanges. In such situations, the promoters' holding may fall short of the minimum promoter contribution i.e., 20% of the post-offer equity share capital.

While the current ICDR (Issue of Capital and Disclosure Requirements) rule permits certain categories of investors to contribute equity shares held by them towards the shortfall, further flexibility has been provided.

In addition, equity shares from the conversion of compulsorily convertible securities held for a year before filing the draft red herring prospectus are to be considered for meeting MPC requirements.

Also, SEBI has provided flexibility in extending the bid closing date on account of force majeure events such as banking strikes or similar circumstances by a minimum of one day instead of the present requirement of a minimum of three days, as per the notification issued on May 17.

To give this effect, the Securities and Exchange Board of India (SEBI) has amended ICDR rules.