Tighter Scrutiny for IPO-bound Start-ups

Start-ups going in for IPOs in 2022 will have to deal with tighter disclosure and compliance norms of the Securities and Exchange Board of India. At its board meeting on December 28, SEBI capped the quantum of IPO proceeds that a firm could use for inorganic growth while further segregating the limit to be utilised if an acquisition target has already been identified. It also capped the quantum of shares that existing shareholders can sell as part of the IPO if the firm is a loss-making one—as is the case with most start-ups. This will have a major impact on PE and VC players who have been offloading their shares as part of the IPOs of almost all start-up entities.