Unlisted companies, which indulge in a lot of circular transactions to build up the net worth or those who are facing a major litigation that could impact their survival, would find it difficult to get listed on the stock exchanges.
According to the guidelines announced by the Securities and Exchange Board of India (Sebi), the regulator will have the right to reject the draft document filed by companies that do not have a clean balance sheet or are not able to convince the regulator on the proper use of the money raised by a public issue.
Any entity whose draft document has been rejected by Sebi will not be able to access the capital market for one year from the date of rejection. Sebi has further clarified it can reject the document on grounds that the ultimate promoters are unidentifiable, money will be used for repayment of loan or a plant for which crucial clearances have not been received or even if the business model looks ?exaggerated, complex or misleading.?
Further, any sudden spurt in the financial numbers just before the document is filed, change in accounting policy, majority of business with related parties or concerns raised by auditors could also lead to the draft document being rejected, stated the regulator on Thursday.
Meanwhile, the regulator has given all companies that have filed their draft document with Sebi a one-time opportunity for withdrawal of draft offer documents.