Sebi mulling measures to check diversion of IPO funds

Regulator trying to eliminate Scope for misuse of initial public offer proceeds by the company promoters

Scope for misuse of initial public offer (IPO) proceeds by the company promoters is going to be eliminated through measures like putting the money in an escrow account and monitoring the fund utilisation by a committee among other things, according to Securities and Exchanges Board of India (Sebi) whole time member S Raman.

"We are looking at measures that can get us the desired results " Raman said on Monday while citing an instance of misutiisation of Rs 120 crore funds by a company promoter.

IPO money will have to be spent for the purpose for which it has been raised. But this principle has often been found violated by the companies, according to him. Responding to a question on by when the measures to check the misuse of IPO funds will be in place, Raman said the Sebi is currently working on the formulation of these measures.

A lot of improvement has already been made in the areas of investor protection and efficient management of capital markets in the country and the proposed guidelines in ensuring the proper utilisation of the money raised from the capital markets will further reinforce the confidence of the investors, he said.

"There is a huge demand for investing in the capital markets but not many great opportunities are available out there for the investors. What is needed now is the integrity on part of the companies that raise the money from the public," he said.

Advising the SMEs to look for listing on the stock exchanges, he said among all the financial options, capital works out to be the cheapest source if tapped from the markets. Valuation of shares of some of the companies listed on the Bombay Stock Exchange SME platform has already grew 300 times of the issue price, he said.