SEBI
SEBI mulls new regulations to curb risks amid surge in small IPOs
Mumbai/IBNS: The Securities and Exchange Board of India (SEBI), the regulatory body for securities and commodity market in the country, is contemplating stricter oversight for micro-cap firms going public, which includes enhanced monitoring of how their funds are used and tougher due diligence requirements for merchant bankers, the Economic Times reported, citing a source involved in the discussions who requested anonymity due to the confidential and sensitive nature of the information.
According to reports, other potential measures under consideration are extending the track record of profitability required and increasing scrutiny of financial statements.
The review also includes potential measures such as requiring a longer track record of profitability and enhanced scrutiny of financial statements, reports the Economic Times, quoting its source.
These steps are being considered in response to recent fraud incidents in this market segment, the source told the Economic Times.
However, the SEBI is not inclined to take over the listing approval process for small and medium enterprises from the National Stock Exchange of India Ltd. (NSE) and BSE Ltd, despite some investor calls for direct regulatory oversight.
The discussions are still preliminary, and any proposed measures might be revised before an initial draft is presented to SEBI’s primary market advisory panel, as reported by the Economic Times.
The micro-listing market in India has surged since the pandemic, fueled by investor interest in small businesses with high growth potential.
Recently, a $1.4 million IPO by a motorcycle dealership with just two outlets and eight employees was oversubscribed more than 400 times, raising concerns about the quality of offerings in this segment.
The increased investor enthusiasm for shares of companies with unproven track records, along with some instances of stock-price manipulation, has prompted the market regulator to take action.
However, no official statement regarding the development has been received so far either from the regulator or its spokesperson.
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