Said the report, Business Line quoting two people in the know of this that Sebi has intensified its focus on objectives for fundraising by suggested IPOs.
The regulator has thus registered its discontent with firms issuing debts that are based majorly on debt repayment and demands more clarifications in the future.
Need clarification
A study by SEBI of multiple IPO offer documents revealed that many had declared repayment of the outstanding debt as the primary purpose for raising fresh capital, prompting a closer look at why new funds were being sought.
Companies should clarify if there have been delays, defaults, and evergreening of outstanding borrowings for which a part of the net proceeds will be used to repay.
If the question focused on repaying loans to fund expansion, then firms should justify why not raising promoter lock-in; also, as long as an amount in excess of 50 percent was being used for logical loan repayments and capex, a firm ought.
According to an industry official, “The regulator has made it clear that companies cannot be vague about the objectives of the issue, and I think that is fair enough. It should also have adequate details on how fresh capital will be spent.”
Companies seeking to raise fresh capital for expansion need to give specific details on how the funds will be used.
Businesses have to be prepared to disclose the microlayers. Otherwise, raising a new issue would be even worse to the point that one should do anything something quickly and spontaneously because this will also lead to additional investigation and delay. SEBI also has a right to ask the company to re-draft the objects of issue, which will need another signature from shareholders,” noted a banker quoted above.
As per the industry official, it would be a challenging task to give details on how they intend to implement invested fresh issue proceeds by such non-manufacturing companies.
Raising Capital
The total fresh capital raised in IPOs in the fiscal year 2013 was Rs. 20,662 crore, which is roughly estimated to be around 4% of its share towards higher value. It had a quicker rebound circulated by the PRIME Database.
One-third of the capital raised for the new facilities was spent on working requirements.
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