The Securities and Exchange Board of India (SEBI) has proposed stricter rules for monitoring how listed companies use money raised through public issues. The proposed SEBI IPO proceeds monitoring rules could make monitoring agencies mandatory for all applicable issuances and introduce penalties when companies fail to provide the information needed to track the use of investor funds.
For IPO investors, this matters because analysing a public issue should not stop once the shares are listed. Understanding why a company is raising money, how much it plans to raise and whether the funds are eventually used for the stated purpose can all influence an investment decision. Alice Blue’s guide on factors that determine a successful IPO and listing provides useful background on the factors investors can consider while evaluating a new issue.
SEBI released a consultation paper on October 13, 2026, based on recommendations from a working group reviewing the SEBI Listing Obligations and Disclosure Requirements Regulations, 2015.
One of the main recommendations is to make the appointment of a monitoring agency mandatory for all applicable issuances, irrespective of the issue size, while excluding the Offer for Sale portion.
The proposal also introduces an enforcement structure for companies that fail to cooperate with monitoring agencies.
Key proposals include:
These measures are currently proposals and may change after SEBI reviews public feedback.
When a company raises fresh capital through an IPO or another public issue, the offer document explains how the company plans to use that money.
For example, a company may say it intends to use IPO proceeds for:
A monitoring agency checks how the company actually uses these funds and reports on whether the utilisation broadly matches what was disclosed to investors.
This creates an additional layer of oversight after the money has been raised.
Without such monitoring, investors may find it more difficult to track whether the hundreds or thousands of crores raised through a public issue are being deployed according to the original plan.
Consider a hypothetical company raising ₹2,000 crore through an IPO.
Its offer document states that:
Investors may value the company partly on the expectation that the new factory will increase production and future revenue.
Now suppose the project keeps getting delayed and the company provides incomplete information regarding the use of the ₹1,000 crore allocated for expansion.
That could change the original investment case.
Stronger monitoring gives investors a clearer way to compare what a company said it would do with IPO money with what it actually does after listing.
This is particularly relevant when analysing an IPO’s valuation. Alice Blue’s guide on how IPO share prices are decided in India explains how company valuation, financial performance, investor demand and market conditions can influence the offer price.
One of the main parts of SEBI’s proposal is a financial penalty for companies that fail to cooperate with their monitoring agency.
If a listed company does not provide the information necessary to prepare the monitoring report, the monitoring agency would still submit a report using the best information available.
The report would also contain a statement recording the company’s non-cooperation.
The stock exchange could then levy a ₹50,000 fine for each instance of non-cooperation reported during the relevant quarter or half-year.
The penalty creates a direct consequence for failing to provide the information required to monitor public money.
However, the proposed enforcement mechanism goes beyond the ₹50,000 fine.
SEBI’s proposal includes a step-by-step escalation process when a company continues to default.
The stock exchange would first issue a notice to the listed company within 30 days of the monitoring report’s due date.
If the company fails to submit the complete report or pay the applicable fine within 15 days of receiving the notice, the exchange could then issue notices to the company’s promoters.
If the problem remains unresolved for another 10 days, the exchange could instruct depositories to initiate action to freeze the promoters’ demat accounts under the applicable standard operating procedure.
The proposed sequence can broadly be understood as:
Non-cooperation → ₹50,000 fine → Company notice → Promoter notice → Possible demat account freeze
A demat account is where securities such as shares are held electronically. Investors unfamiliar with how these accounts work can read Alice Blue’s guide on Demat accounts and the IPO allotment process.
The proposed monitoring requirement would exclude the Offer for Sale (OFS) portion of an issue.
This is because fresh issues and OFS transactions work differently.
Fresh Issue
In a fresh issue, a company creates new shares and sells them to public investors.
The money raised goes into the company.
Since the business receives the capital, investors need visibility into how that money is eventually used.
Offer for Sale
In an OFS, existing shareholders sell shares they already own.
The proceeds go to the selling shareholders rather than to the listed company.
For example, imagine an IPO containing:
The total IPO size would be ₹2,500 crore.
However, only the ₹1,500 crore fresh issue amount enters the company. The ₹1,000 crore OFS proceeds are received by the shareholders selling their stake.
It therefore makes sense that SEBI’s proposed monitoring framework focuses on money that is actually available for the company to use.
SEBI is also seeking to prevent companies from avoiding scrutiny by changing their monitoring agency.
Under the proposed framework, if a company has been reported for non-cooperation, it would not be allowed to terminate its agreement with the monitoring agency or appoint another agency until the default is corrected.
The company would first have to provide the missing information necessary to complete the monitoring report.
Once that happens, the monitoring agency would have 15 days to submit a complete report and state that the earlier non-cooperation had been rectified.
This provision could make it harder for issuers to simply move to another agency when questions arise over how public issue proceeds are being used.
Another important part of the proposal involves public disclosure.
SEBI has proposed that stock exchanges prominently display:
on their websites.
This could make IPO proceeds monitoring information easier for ordinary investors to find.
Many investors already follow company disclosures such as quarterly financial results, shareholding patterns and corporate announcements.
If the proposal becomes a final rule, monitoring reports could become another document worth reviewing—especially for companies that raised large amounts of fresh capital.
SEBI’s proposal makes an important distinction between a payment dispute and a failure to provide information.
A company failing to pay the monitoring agency would not automatically be treated as non-cooperation.
Instead, monitoring agencies may be allowed to collect their full fees in advance through contractual arrangements.
If the agreement ends before the company has fully used the issue proceeds, the monitoring agency would need to refund the proportionate amount relating to the remaining period.
This keeps commercial payment disputes separate from the more serious issue of withholding information about investor funds.
SEBI’s proposal also highlights why investors should look beyond subscription numbers and potential listing gains.
Before applying for an IPO, investors can consider several questions.
Read the “objects of the issue” section of the offer document.
Understand whether the funds are being raised for expansion, debt repayment, working capital or another purpose.
A ₹5,000 crore IPO does not necessarily mean ₹5,000 crore is entering the business.
If ₹4,000 crore is OFS and only ₹1,000 crore is a fresh issue, most IPO proceeds are going to existing shareholders.
A good business can still be an expensive investment if the IPO valuation is too high.
Investors should monitor how the company executes the plans described in its IPO documents.
High subscription levels can show strong investor demand but do not guarantee long-term performance.
Alice Blue’s guide on IPO oversubscription and its effect on allotment explains why high subscription numbers should not be treated as the only factor in an IPO investment decision.
If adopted, the proposed rules could provide several benefits.
More issuances would come under monitoring agency oversight, giving investors greater visibility into how fresh capital is being used.
Companies that refuse to provide information could face a defined escalation process instead of the issue remaining only as a disclosure concern.
The possibility of promoter demat account action could create an additional incentive for companies to rectify compliance problems.
Displaying monitoring reports prominently on stock exchange websites could make important information easier for retail investors to access.
No.
This distinction is important.
SEBI regulates the securities market and sets requirements relating to disclosures, investor protection and compliance. Regulatory monitoring does not guarantee that a company will perform well after listing.
An IPO can still face:
Monitoring IPO proceeds can improve transparency, but investors still need to evaluate the company’s financial position, business model and valuation.
Investors interested in current public issues can also check Alice Blue’s live and upcoming IPO information for issue dates, price bands and other IPO details.
No.
As of October 14, 2026, these proposals have not become final regulations.
SEBI published its consultation paper on October 13, 2026, as part of a review of the framework governing the monitoring and disclosure of the utilisation of issue proceeds. Public comments have been invited until November 3, 2026.
SEBI may review industry and public feedback before deciding whether to adopt, modify or drop individual recommendations.
Investors should therefore distinguish between a SEBI consultation proposal and a rule that has already come into force.
SEBI’s proposed IPO proceeds monitoring rules could increase accountability for companies that raise money from public investors.
The regulator is considering making monitoring agencies mandatory for all applicable issuances regardless of size, excluding the OFS component. Companies that fail to cooperate could face a ₹50,000 fine per reported instance, followed by notices and potentially the freezing of promoters’ demat accounts if the default continues.
The proposal also aims to prevent companies from changing monitoring agencies while they remain non-compliant and could make monitoring reports more visible through stock exchange websites.
For investors, the bigger lesson is straightforward.
Analysing an IPO should not end with the listing.
If investors provide capital based on a company’s promise to expand capacity, reduce debt or fund growth, tracking whether that money is actually deployed as planned can provide useful insight into management execution.
SEBI’s proposal attempts to strengthen exactly that part of the IPO process: what happens to investor money after the fundraising is complete.
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