Sebi likely to tighten monitoring norms for IPO and QIP proceeds

Sebi is considering tightening rules to monitor funds raised via IPOs, QIPs and rights issues, including lowering the threshold for appointing a monitoring agency to Rs 50 crore

The Securities and Exchange Board of India (Sebi) is considering tightening rules governing the monitoring of funds raised by companies through initial public offerings (IPOs), qualified institutional placements (QIPs) and rights issues, amid concerns over delays, inadequate disclosures and the misuse of proceeds, according to people familiar with the matter.

 

At present, companies are required to appoint a Sebi-registered monitoring agency — typically a credit rating agency — only if the fresh capital raised exceeds ₹100 crore. The markets regulator is examining whether to lower this threshold to ₹50 crore or remove it altogether, a move that would expand oversight to a much larger pool of fundraisings, particularly by smaller issuers.

 

The issue was discussed at a meeting of Sebi’s primary market advisory committee last month, the sources said. An email seeking Sebi comment remained unanswered until going to press.

 

The regulator is also reviewing the disclosure framework governing monitoring reports. Under the current system, monitoring agencies submit quarterly reports to the issuer, which is then required to file them with stock exchanges within 45 days of the end of the quarter.

 

In practice, this process has often faltered. Often companies have either delayed submissions or failed to disclose reports, leaving investors with limited visibility on how funds have been deployed. In some cases, firms have also declined to share data or documents with monitoring agencies, or have failed to make payments to them, effectively stalling the oversight process, the people said. 

 

To address these gaps, Sebi’s expert group has proposed allowing monitoring agencies to submit their reports directly to stock exchanges within the stipulated 45-day window, bypassing the issuer. The proposal is aimed at ensuring timely disclosures and reducing the scope for interference by listed entities.

 

Separately, the regulator is considering tougher action against companies that do not cooperate with monitoring agencies. Under the existing framework, a listed company can be fined ₹50,000 for non-cooperation. If such behaviour continues, Sebi may initiate further regulatory action, the sources said.

 

Monitoring agency reports typically track the deployment of funds against the stated objects of the issue. A company’s board and senior management are required to provide formal comments on the findings, and the disclosures must be made public on the company’s website and through stock exchange filings.

 

For SME IPOs, Sebi has already lowered the threshold for appointing a monitoring agency to ₹50 crore, with effect from March 2025.

 

Recent data suggest the impact on large issuers may be limited. Only three mainboard IPOs last year had a fresh issue size of less than ₹100 crore. However, investment bankers said that of the more than 200 IPO filings made during the calendar year 2025, a sizeable number of companies could be looking to raise less than ₹100 crore through fresh issues.

 

In an IPO, the total issue size can comprise a fresh issue, an offer for sale, or a combination of both. While proceeds from an offer for sale accrue to selling shareholders, funds raised through a fresh issue go to the company and are intended to be deployed for stated purposes such as expansion, debt repayment or working capital.

 

In 2025, 103 companies raised ₹1.75 trillion through mainboard IPOs, of which ₹64,419 crore, about 37 per cent, came from fresh issues. The reliance on fresh capital was even more pronounced among smaller firms. During the year, 267 companies raised ₹11,455 crore through SME IPOs, with ₹10,413 crore coming from fresh issues.

 

Expanded oversight scope

 

• Current threshold for appointing a monitoring agency is ₹100 crore
• Sebi panel weighing a cut to ₹50 crore or scrapping the threshold to widen oversight, especially for smaller issuers
• Proposal to let monitoring agencies file reports directly with stock exchanges to curb delays and issuer interference
• Panel also considering tougher penalties for companies that fail to cooperate or share information with monitoring agencies