The board will consider whether to raise the minimum application size for the public offerings of small and medium(SMEs) to ₹2 lakh or even higher at ₹4 lakh from the existing ₹1 lakh. The proposed tightening of rules comes in the wake of instances of diversion of issue proceeds to shell companies controlled by promoters and inflation of revenue by circular transactions through related parties.
The regulator has suggested that smaller firms would be eligible for an IPO only if the issue size is over ₹10 crore and have an operating profit of ₹3 crore from operations for at least any two out of three financial years preceding the application. Further, it recommended limiting offer for sale by promoters to 20% of the issue size and disclosure of merchant bankers fees in the prospectus.
In the current financial year till October 15, 159 SMEs have raised more than ₹5,700 crore through IPOs. In FY24, there was the highest number of SME public issue with 196 firms tapping the market to mobilise over ₹6,000 crore.
The Sebi board will discuss revised rules for custodians as some of them such as networth requirement was fixed almost three decades ago.
The regulator thinks if the net worth is increased custodians would be better equipped to absorb losses and maintain operational stability.Custodians offer services such as safekeeping of assets, maintenance of securities accounts to clients likes foreign portfolio investors, mutual funds and alternative investment funds.At present, there are 17 custodians registered with Sebi. Assets under custody of custodians have increased to ₹278.50 lakh crore in September 2024 from ₹2.70 lakh crore in March 2002.
“Considering the increased scope of services and the exponential growth in the volume of business provided by custodians to its clients, custodians are prone to fraud and operational risks,” it had said in a discussion paper last month.
The regulator’s board would also consider changes to the definition of unpublished price sensitive information (UPSI)under insider trading norms. The move is aimed to bring uniformity in compliance by listed companies.
Any information relating to a company, that is not generally available but on becoming available affect the share price, is considered UPSI.
Sebi has proposed to include events such as revision in ratings, fund-raising activities, agreements impacting control of the company, frauds and resolution plan in the definition of UPSI.
