The Securities and Exchange Board of India (SEBI) is planning to tighten regulatory oversight on how companies utilise equity funds raised from public markets. The proposed changes are aimed at improving transparency, strengthening issuer accountability and enhancing investor confidence amid a slowdown in fundraising activity in the equity markets.
According to draft proposals reviewed by Reuters, the regulator is considering a stricter monitoring framework for companies raising capital through IPOs and other market instruments.
Under the proposed framework, monitoring agencies typically credit rating firms, may receive enhanced authority to track and report the end-use of funds raised through public issues and other equity fundraising routes.
The draft recommendations include direct submission of monitoring reports to stock exchanges, along with mandatory disclosure of instances where companies fail to cooperate with monitoring agencies.
SEBI is also considering introducing financial penalties for issuers that obstruct or delay monitoring activities. The proposed penalty amount is ₹50,000 for each violation linked to non-cooperation.
One of the major proposed changes involves lowering the threshold for mandatory monitoring of fund utilisation. The regulator is considering reducing the limit from ₹100 crore to ₹50 crore.
If implemented, the revised threshold would expand monitoring requirements across a wider range of fundraising activities, including initial public offerings (IPOs), rights issues, preferential allotments and qualified institutional placements (QIPs).
The move is expected to bring a larger number of issuers under regulatory scrutiny regarding deployment of capital raised from investors.
The proposed mechanism is understood to be broadly aligned with practices followed in the United Kingdom, where regulators require stricter supervision of IPO proceeds through investment banks or advisory firms.
Currently, monitoring agencies in India review the use of public issue proceeds but often face challenges in obtaining timely information from issuers. Existing rules also do not mandate public disclosure of all monitoring reports.
SEBI’s proposed changes seek to improve transparency by ensuring more direct reporting and accountability mechanisms.
The proposed tightening comes at a time when equity fundraising activity has moderated following market volatility and uncertainty linked to geopolitical tensions in West Asia.
Despite a strong pipeline of approved IPOs and pending proposals reportedly valued at around ₹2.5 trillion across nearly 190 companies, only a limited number of firms have entered the market so far in the current calendar year.
It is believed that stronger governance around fund deployment could improve investor sentiment once fundraising activity accelerates again.
Read More: SEBI Proposes Simpler Rules for Transmission of Securities After Investor’s Death!
SEBI’s proposed framework signals a stronger regulatory push towards improving transparency and accountability in the use of public market funds. The measures, if implemented, could lead to stricter compliance standards for issuers while enhancing investor protection across capital markets.
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Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.
Investments in the securities market are subject to market risks, read all the related documents carefully before investing.
Published on: May 28, 2026, 11:07 AM IST
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