A S BANKA ADVISORS

If your company plans an SME IPO, or is already listed and plans a preferential allotment or a QIP, there is a new cost line to think about. On 13 October 2026, SEBI put out for comment the recommendations of its Working Group on how listed companies’ use of issue proceeds is monitored and disclosed. The headline proposal: a monitoring agency for every issue, whatever its size. Comments are open until 3 November 2026. Nothing has changed yet: until SEBI amends the SEBI (ICDR) Regulations, 2018 and the SEBI (LODR) Regulations, 2015, the current rules apply.

The rule today

A monitoring agency is a credit rating agency registered with SEBI that checks whether issue money is spent on the objects stated in the offer document. Under the ICDR Regulations, the issuer has to appoint one only above a size threshold:

Banks, public financial institutions and insurance companies are outside these requirements. An SME issuer below the threshold files a statutory auditor’s certificate on the use of the money with its financial results instead (Regulation 262(5)).

What would change for your company

1. A smaller raise would carry an agency

An SME IPO of Rs 50 crore or less, or a preferential allotment of Rs 100 crore or less to a strategic investor, would need an agency from the start. Build its appointment, and its fee, into the issue plan. SEBI also proposes that unpaid fees are not grounds for reporting non-cooperation, and that the agency may take the full fee in advance and refund a proportionate amount if the agreement ends before the money is fully used.

2. The agency, not the company, would file the report

The agency would send its report directly to the stock exchanges within 45 days of the quarter end (60 days for the quarter ending 31 March), with a copy to the company. Before that, the audit committee would review the agency’s draft and comment on it; the company would forward it to the agency and place it before the board for information. The agency would file even if the audit committee’s comments do not arrive. Your audit committee calendar needs to fit that window.

3. Non-cooperation would be public, and would reach the promoters

If the company does not co-operate, the agency would file on the best available information with a “Statement of non-cooperation” that flags the potential risk of diversion and advises investors to exercise caution. The exchanges would display it prominently. The proposed escalation:

• a fine of Rs 50,000 per instance in a quarter (half year for SME entities);
• notices to the promoters if the fine is unpaid, or no complete report is filed, within 15 days of the exchange’s notice; and
• if still unresolved 10 days after that notice, intimation to the depositories to begin freezing the promoters’ demat accounts.

A company in that position could not change its agency until it rectifies. For a founder-promoter, this is a personal consequence, not only a company one.

4. The scope is the whole raise

The agency would monitor 100 percent of gross issue proceeds other than offer for sale, including pre-IPO money used for the stated objects, money parked with scheduled commercial banks, issue expenses borne by the company, and end use by an investee where investing in another entity is an object. If your objects include funding a subsidiary, the subsidiary’s use of that money comes into scope.

5. SME paperwork would shift

The Regulation 262(5) auditor’s certificate would go. The working capital certificate under Regulation 262(6) would be filed with half-yearly results instead of quarterly results.

If you are mid-raise

Under the proposed transition, an offer document filed on or after the date the amendments come into force, or a fund raising started before that date where no money has been raised yet, would follow the new rules from that date. Money already raised without needing an agency would stay under the existing rules until it is fully used.

What to do now

1. Keep complying with the current ICDR and LODR rules.
2. For an SME IPO, preferential issue or QIP in the pipeline, plan for an agency even below today’s threshold.
3. Write the objects and the deployment schedule so that they can be monitored line by line.
4. Comment to SEBI by 3 November 2026 if a proposal affects your plans.

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Source: Securities and Exchange Board of India, Consultation Paper on Recommendations of the Working Group for review of SEBI (LODR) Regulations, 2015: Review of framework for monitoring and disclosure of utilization of issue proceeds, 13 October 2026, sebi.gov.in
Source: Securities and Exchange Board of India, Report of the Working Group for review of the SEBI (LODR) Regulations, 2015, Chapter I, sebi.gov.in
Source: Securities and Exchange Board of India, SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018, Regulations 41, 137, 162A, 173A and 262, sebi.gov.in

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A S Banka Advisors Private Limited. This article is for general information and is not legal advice.