New Delhi: The Securities and Exchange Board of India (SEBI) has reportedly barred mutual fund schemes from participating in pre-IPO placements of equity shares and related instruments, permitting asset managers to invest only in the anchor investor portion or the public issue of an initial public offering (IPO).
In a letter to the industry body Association of Mutual Funds in India (AMFI), the capital markets regulator cited Clause 11 of the Seventh Schedule of the SEBI (Mutual Funds) Regulations, 1996, which says: “All investments by mutual fund schemes in equity shares and equity-related instruments must be made only in securities that are listed or to be listed.”
The regulator said the clarification was issued after receiving several queries on whether mutual funds could participate in pre-IPO placements before the opening of the anchor or public issue. It warned that such participation could result in mutual funds holding unlisted shares if an IPO were delayed or cancelled.
“If the schemes of the Mutual Funds are allowed to participate in pre-IPO placements, they may end up holding unlisted equity shares in case the issue or listing cannot be concluded for any reason, which would not be in compli-ance with the said clause,” media reports quoted the SEBI as saying in the letter.