The Securities and Exchange Board of India (Sebi) has increased its scrutiny of companies that are raising money through initial public offerings (IPOs) in the wake of several companies choosing to go through the IPO route for debt repayments.
According to a Business Line report, Sebi found that a majority of companies getting listed on the bourses cite debt repayment as the major objective for raising fresh capital.
According to an investment banker, this prompted Sebi to look deeper into the reasons why companies raise fresh capital.
“The regulator has made it clear that companies cannot be vague about the objects of the issue, which I think is fair. It wants adequate details and some comfort level on how the fresh capital will be spent,” Business Line quoted an industry official as saying.
Companies should offer granular details on how the capital raised would be used and should explain why promoter lock-in cannot be increased if the objective of the fresh issue is to fund capital expenditure.
The regulator is yet to come out with a clarification on the report.
