Lok Sabha Question No. 2173 (UNSTARRED), answered on 2017-07-28
Subject: Initial Public Offerings
Ministry: FINANCE
Asked by: KOTHA PRABHAKAR REDDY

## GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENT OF ECONOMIC AFFAIRS

## LOKSABHA

## UNSTARRED QUESTION NO. 2173 TO BE ANSWERE ) ON FRIDAY, 28 TH JULY, 2017/ SHRA VANA 6, 1939 (SAKA)

## INITIAL PUBLIC OFFERINGS

## QUESTION

## 2173. SHRI PRABHAKAR REnDY KOTHA:

Will the Minister of Finance be p eased to state:

- (a) whether the Government! S( curities and Exchange Board of India has noticed a mismatch between the stated purpose of the Initial Public Offerings (IPOs) and its end use, if so, the details thereof;
- (b) whether the Government is contemplating on bringing a proposal to make it compulsory for all companies to appoint monitoring agencies to ensure proper utilisation of IPO money; and
- (c) if so, the details thereof?

## ANSWER

## MINIS1ER OF STATE IN THE MINISTRY OF FINANCE

## (SHRI ARJUN RAM MEGHWAL)

(a): As per the provisions of Sec ions 13(8) and 27 of Companies Act, 2013, a company may vary the objects of a public issue by passing a special resolution and providing an exit option to dissenting shareholders who have not agreed to the proposal to vary the objects of the issue.

The regulatory framework under SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 (ICDR Regulations) and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR Regulations) provides for a disclosure based re gime.

In terms of Regulation 32 ofLO )R Regulations, the listed entities are required to submit periodic reports to stock exchange indicating deviations, i1any in the use of proceeds from the objects stated in the offer document for public issue, rights issue, preferential iss e etc., along with any comments or report received from the monitoring agency in case of public or rights issues.

Further, in terms of Regulation lS( 4) ofICDR Regulations, the issuer shall, within forty five days from the end of each quarter, publically dissemir ate the report of the monitoring agency by uploading the same on its website as well as submitting the same to the stock exchange(s) on which its equity shares are listed.

Such disclosures/ reports filed with the exchanges are disseminated on the websites of stock exchanges. There is no requirement for listed entities to submit such information! reports or copies thereof to SEBI.

SEBI has also taken several enfo cement actions where the actual usage of IPO proceeds has differed with the issue objects.

(b) and (c): Earlier, the ICDR Re gulations, required mandatory appointment of Monitoring Agency for monitoring the utilization of the funds raised f the issue size of specified securities exceeds INR 500 crore.

In order to further strengthen the monitoring of issue proceeds raised in IPOs/ Follow on Public Offers (FPOs)/ Rights Issues, SEBI has recently amended ICDR Regulations for mandatory appointment of Monitoring Agency where the issue size (excluding 0 fer for sale component) is more than INR 100 crore.

At present, there is no proposal te make it compulsory for all listed companies to appoint Monitoring Agency.