Role of Securities and Exchange Board of India (SEBI) in IPOs : A Legal Analysis
An Initial Public Offering (IPO) is the process by which a private company becomes a public company by offering its shares to the general public for the first time. It is a way to raise capital from public investors by issuing new shares of the stock. An IPO is considered as a significant financial event for the company and marks its transition from being privately held to publicly traded on the stock exchange. Therefore pre IPO shares are also known as unlisted shares.
The process of taking a company public through an Initial Public Offering (IPO) is a complex undertaking that involves navigating a web of legal regulations and compliance requirements. To safeguard the integrity of the securities market , SEBI acts as a guardian.
Functions and powers of SEBI:
- Regulatory Oversight and Approval: it is essential to adhere to securities laws.
- Disclosure Requirements and Investor Protection: one of the primary objectives is to ensure transparency and protect investors.
- SEBI Review Process
- Enforcement actions and sanctions : it is essential to examine that enforcement action s against companies and individuals involved in fraudulent or non-compliant activities related to IPOs is done.
- Evolving regulations and future trends: adaptability to technological advancements, market trends, and global economic shifts.
While conducting a legal analysis of what went wrong with Nykaa IPO , following factors were considered:
- Market conditions : Due to unfavourable market conditions , investor sentiment and overall performance of IPO can be affected.
- Disclosure and Compliance Issues: Non -compliance with SEBI regulations and inadequate disclosure could have led to legal and regulatory challenges.
- Financial Discrepancies: Any kind of discrepancies in the financial statements or if the company has failed to meet market expectations, it could have led to legal scrutiny.
- Litigation or legal disputes: Any disputes that have emerged post-IPO could impact the company’s reputation and stock performance.
- Market perceptions and Sentiments : Any kind of negative sentiments driven by rumors, news or other factors could have legal implications and could require communication and transparency.
Success or failure of an IPO can be influenced by various factors. It is a necessity to consult with legal experts , analyse regulatory filings and monitor the ongoing developments to understand the situation thoroughly.
Few notable IPOs in recent terms are as follows:
- IRFC ( Indian Railway Finance Corporation) : a dedicated financing arm of Indian Railways
- Indigo Paints : Fast growing paint company
- Roots Ventures: A venture capital firm
- Home First Finance Company : A housing finance company
- Brookfield REIT: A real estate investment trust
The impact of SEBI on the legal dynamics of IPOs will remain a focal point of discussions surrounding securities markets and corporate finance.
Author:- Hemika Gala, a Student of Jiterndra chauhan college of law
