SEBI's LODR Reset and the Money Raised from Investors

 

BIZ MASALA  |  MARKETS & INVESTOR PROTECTION

A first concrete proposal would extend independent monitoring across public fund-raises. The test is whether better tracking becomes timely, comparable information investors can actually use.

By Biz Masala  |  16 October 2026

Hero image | The investor question begins after the issue closes: where did the money go?

SEBI’s LODR review has moved from broad ambition to a specific investor-facing question: can the market follow money raised from investors until it is used? A consultation paper published on 13 October proposes monitoring agencies for a wider range of listed-company fund-raises, direct reporting to stock exchanges and stronger consequences when an issuer does not cooperate. These are proposals, not rules in force.

That distinction matters. At the Financial Express Modern BFSI Summit on 15 October, SEBI Chair Tuhin Kanta Pandey described a broader LODR review aimed at simplifying compliance without weakening investor protection. The issue-proceeds paper is one early, defined chapter of that larger exercise; it is not the completed “reset.”

What the proposal would change

The working group’s recommendations aim to move monitoring from a company-controlled reporting path toward a more direct and visible one. In practical terms:

Area	Existing framework in brief	Proposal under consultation	Investor relevance
Who is monitored	Monitoring requirements apply to defined categories and issue-size thresholds; listed companies also have audit-committee and exchange disclosure duties.	Make a monitoring agency mandatory for IPOs on mainboard and SME platforms, FPOs, preferential issues and QIPs, regardless of issue size. Exclude the offer-for-sale portion.	More fund-raises would have an independent utilisation trail.
Who receives the report	Monitoring and disclosure duties are split across the ICDR and LODR frameworks, with company and audit-committee processes involved.	Monitoring agency sends its report directly to stock exchanges within prescribed timelines; rules would be harmonised under LODR and ICDR.	Fewer reporting hand-offs and a clearer public location for the information.
If the company does not cooperate	A monitoring process can be weakened if the issuer does not provide information or access.	Agency reports on best available information and flags non-cooperation; exchanges may levy a proposed ₹50,000 fine per instance.	Silence would be visible and actionable, rather than simply delaying disclosure.
If the agency relationship ends early	A break in the engagement can create a reporting gap before all proceeds are used.	Issuer and outgoing agency must keep reports flowing during transition until a replacement arrangement is in place.	Reduces the risk that monitoring stops mid-stream.

 

From a disclosure duty to a money trail

Illustrative image | Monitoring checks documented use against stated objects; it does not certify commercial success.

Current rules already require disclosures around deviations in the use of issue proceeds and place monitoring responsibilities on audit committees. Monitoring agencies are also required for specified classes of issues under the existing framework. SEBI’s proposal would broaden the coverage and sharpen the reporting chain, rather than inventing utilisation oversight from scratch.

The proposal also seeks to cover 100% of gross issue proceeds, excluding selling shareholders’ offer-for-sale proceeds. That makes the boundary clearer: money raised by the issuer is tracked; money received by a shareholder selling existing shares is not company capital and sits outside this monitoring exercise.

How the proposed reporting chain would work

Process illustration based on SEBI’s consultation proposal; not a measure of performance.

The protections this can—and cannot—offer

Illustrative image | Timely exchange-hosted reports could make utilisation information easier to find and compare.

A monitoring report can help answer whether proceeds are being applied to the purposes disclosed to investors, whether there are deviations, and whether the issuer is cooperating. It cannot tell investors whether the project will earn a profit, whether the company’s shares are fairly valued, or whether every misuse can be prevented before it happens.

Nor is a monitoring agency a compensation mechanism. If a project fails or a company collapses, reporting may improve accountability and help regulators, exchanges and investors understand the record. It does not automatically restore losses. The protection is earlier visibility and a clearer trail, not a guarantee of recovery.

What SEBI should get right before finalising the rules

Design question	Why it matters	A practical safeguard
Independence	The agency must be able to report adverse findings even when the issuer is its client.	Disclose appointment, fees, conflicts and any change of agency; protect direct reporting to the exchange.
Comparable reporting	Investors cannot compare issuers if reports use different formats or vague categories.	Use a common machine-readable template showing original object, amount, utilisation, balance, deviation and evidence date.
Clear evidence standard	“Best available information” can be useful, but readers need to know what was missing.	Separate verified records, management statements and unavailable evidence; explain the basis for each conclusion.
Timely public access	A report is only useful if it appears promptly where investors look.	Put reports on exchange filings pages with alerts, searchable issuer histories and accessible plain-language summaries.
Proportionate costs	Monitoring small issues can add fixed costs and burden smaller issuers.	Set proportionate processes and fee transparency while preserving the same core investor information.

 

The real measure of a reset

SEBI’s first LODR proposal points in a constructive direction: widen the monitoring net, make the reporting route more direct and treat non-cooperation as a disclosure event with consequences. Its strength will depend on implementation—especially the agency’s independence, the evidence behind each report, and whether ordinary investors can find and understand the information.

The broader LODR review still has more ground to cover. The working group’s first report also includes separate chapters on exchange penalties and related-party transaction provisions, but the October 13 consultation paper placed only the issue-proceeds chapter before the public. That phased approach gives investors and companies a concrete proposal to assess; it also means the larger promise of simpler compliance with stronger protection remains unfinished.

For investors, one plain question should anchor the final rule: after a company raises money in the market, can the public see—clearly and on time—what was promised, what was spent, what remains and what could not be verified?

Sources and scope

Sources reviewed through 16 October 2026. The SEBI proposals described here remain under consultation and should not be read as operative law. The separate SEBI consultation on SME IPO eligibility is an ICDR review and is not treated here as part of this issue-proceeds proposal.

• SEBI consultation paper, 13 October 2026: Review of framework for monitoring and disclosure of utilisation of issue proceeds

• SEBI LODR Regulations, last amended 14 July 2026

• SEBI public comments page for consultation proposals

• Business Standard, 13 October 2026: proposed monitoring, exchange reporting and non-cooperation measures

• Financial Express, 15 October 2026: SEBI chair on broader LODR review