SEBI eases IPO norms, tightens definition of promoter group

The Securities and Exchange Board of India (SEBI) has eased disclosure norms for initial public offerings (IPOs) and tightened the definition of “promoter group” to prevent fraudulent transactions. As per the new guidelines, IPO issuers will now be allowed to announce the price bands two days before the issue opens for subscription instead of the earlier five days. The new IPO norms include “immediate relatives” within the definition of promoter and promoter groups. Financial disclosures will need to be made for three years, as compared with the earlier five years. Besides, institutional investors, such as alternative investment funds, will be able to contribute up to 10 per cent of what the promoter is required to offload in an IPO. The easier disclosure requirements are aimed at encouraging genuine companies to raise funds through the capital markets route, while the stricter definition of promoter group will ensure that IPOs are not misused to evade taxes.