IPO: SEBI mulls 90-day lock-in for anchor investors as confidence booster

Our Bureau | | Updated on: Nov 16, 2021
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Market regulator SEBI has proposed a 90-day lock-in for anchor investors. Instead of imposing this on all anchor investors, a SEBI panel suggested that not less than 50 per cent of the anchor book should be given to those investors agreeable to a 90-day or longer lock-in.

Anchor investors are mainly institutional players who subscribe to Initial Public Offers just a day before the issue opens for the public. They are given confirmed allotment as they put in large bids. A SEBI discussion paper, published on Tuesday, suggested that at least 50 per cent of the anchor book have a lock-in of 90 days.

“Presently, the shares allotted to anchor investors are locked in for 30 days from the date of allotment. It is felt that a longer lock-in will provide more confidence to other investors. Therefore, there may be a need to review the period of lock-in for anchor investors,” the SEBI paper said. Experts say this could be a good move considering the lofty valuations at which the companies are launching IPOs and anchor investors get an easy exit in just a month of listing.

Eye on general purpose fund

Among other measures, SEBI wants to put under lens the general corporate purpose (GCP) funds that companies set aside from the IPO money. Currently, 25 per cent of IPO proceeds is marked for GCP. “...The utilisation of GCP amount may need to be disclosed in the quarterly Monitoring Agency report,” the paper added .

Cap on funds for buys

Companies raising money via IPOs may now only be allowed to set aside 35 per cent of their total funds for acquisitions where the prospectus does not mention any target or purpose. “Raising funds for unidentified acquisition leads to some amount of uncertainty, ambiguity in the IPO objects. These uncertainties... increase in case a major portion of the fresh issue is earmarked for such unidentified acquisition...

“It is proposed to limit up to 35 per cent of the fresh issue size for deployment on such objects of inorganic growth initiatives and GCP, where the intended acquisition/strategic investment is unidentified in the objects,” the discussion paper said.

In case of companies with no clear identified promoters, SEBI wants to waive the one-year lock-in for shareholders post listing.

“...For such significant shareholders who are selling through OFS, their remaining post issue shareholding can be locked-in for 6 months from the date of allotment in IPO,” SEBI has proposed.

Published on November 16, 2021

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