Who invest in 'discounted IPOs' will no longer be cheated, SEBI is working on solutions

Market regulator SEBI has proposed major changes in the SME IPO process. The aim of these changes is to protect the interests of investors investing in the issue, impose strict compliance requirements on companies and increase the cost of remaining listed.

After complaints of irregularities in SME IPOs, SEBI has now issued a consultation paper for improvement and sought suggestions. Experts on SEBI's proposals say that making the rules stricter will improve checks and balances. Also, compliance will be better.

Complaints of irregularities in SME IPOs

SEBI has taken this step after increasing cases of irregularities in SME IPOs in the last few years. It is worth noting that many SME IPOs raised funds at increased valuations, but later investors had to face losses. SEBI has also penalized many companies for misuse of funds or other financial irregularities. Last financial year saw the highest number of SME IPOs with 196 issues. More than Rs 6,000 crore was raised through these.

These changes recommended

There is no minimum limit on the size of SME IPOs right now. SEBI has now suggested to make it ₹ 10 crore. There is a proposal to increase the IPO application amount four times to ₹ 4 lakh.

While SEBI has also proposed to set up a monitoring agency for listed SME companies which will keep an eye on the use of funds raised from investors.

Better protection to small investors

Apart from this, to provide better protection to small investors, SEBI has also proposed to increase the application amount from ₹ 1 lakh to ₹ 2 lakh, keep the IPO document public for at least 21 days and make it mandatory for a company to show an operating profit of ₹ 3 crore in two out of the last three years before the IPO.

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Monitoring will increase

According to a report, the SEBI's proposal to improve listing rules and compliance requirements for SMEs will ensure 'checks and balances' to detect unwanted manipulation with strict compliance rules.

However, increasing the minimum subscription amount can be a hindrance to raising capital and wider participation.