Devise ways to monitor end use of IPO funds: Govt to Sebi

The government has asked market regulator the Securities and Exchange Board of India (Sebi) to devise ways of monitoring the end use of money collected through initial public offering (IPO), in order to keep a check on vanishing companies.

While the Ministry of Corporate Affairs (MCA), through technical scrutiny of balance sheets, keeps a check if companies are using IPO proceedings as promised in the prospectus, the Ministry wants Sebi too to look at the aspect, sources said.

"More coordination is required between the MCA and the Sebi to ensure that the correct information is available regarding how companies use their IPO proceeds. Lot of times companies do not regularly file quarterly results with the registrar of companies, but they do inform stock exchanges, so we have asked Sebi if they could also monitor IPO proceeds," a senior MCA official told PTI.

The proposal was mooted at a recent meeting of the Coordination and Monitoring Committee (CMC) on vanishing companies, headed by MCA Secretary R Bandyopadhay and represented by ministry officials, the Sebi and the Reserve Bank of India.

At present, sources said, MCA is the only authority that can monitor the end use of IPO money.

In 2009, around 20 companies raised a total of Rs 20,000 crore through IPOs. In 2010 so far, as many as 16 companies have come out with public offerings, including IPOs and FPOs.

Moreover, a host of companies have filed papers for Sebi approval for raising funds worth Rs 15,788 crore through public offers so far this year. While, issues amounting to another Rs 22,805 crore are awaiting the market regulator's nod, according to a report by SMC Capital.

Besides, around 90 companies in the country have been recognised as vanishing companies, according to the latest list available on the website of Ministry of Corporate Affairs.