SEBI has proposed to limit the use of the IPO raised money for mergers and acquisitions for startups. The combined limit for the fresh issue size is up to 35%. SEBI has decided this limit considering the asset-light nature of the startups. These startups need funds neither for fixed assets nor for capital expenditure.
The limit will not be imposed on the acquisition with the specific disclosure about these types of investments in their offer documents. SEBI also mentioned monitoring of the general corporate purposes. The companies do not need to specify how they will use the money.