The Securities and Exchange Commission has proposed a cap on startup IPO proceeds for mergers and acquisitions.
The Securities and Exchange Board of India (Sebi) has proposed a cap on the amount of money obtained through initial public offerings (IPOs) that companies can use for mergers and acquisitions (M&As), unless takeover targets are selected ahead of time.
“Raising funds for undisclosed acquisitions creates some ambiguity in the IPO objects,” the Sebi stated in a discussion paper released on Tuesday. Stakeholder opinions on the suggestions are due by November 30th, according to the regulator.The document comes after a slew of successful IPOs, including Zomato NSE 1.71 percent, Paytm, and Nykaa NSE -4.79 percent. The Paytm IPO, which raised Rs 18,300 crore, is the largest ever in India.
“A combined limit of up to 35 percent of the fresh issue size is proposed for deployment on such objects of inorganic growth initiatives and GCP (general corporate purpose), where the intended acquisition/ strategic investment is unidentified in the objects of the offer,” according to the Sebi paper.
The majority of offer filings mention acquisition plans but do not name possible targets. Unlike typical manufacturing companies, many startups are asset light and do not require financing for fixed assets or capital expenditure, according to Sebi. Their expansion is fueled by the acquisition of new customers and technologies.
Follow Startup Story
Related Posts
