Market regulator Securities and Exchange Board of India (SEBI) has disposed proceedings against Neomile Corporate Advisory Ltd (the noticee) which was accused of misrepresenting itself as a SEBI-registered merchant banker while advising companies on their initial public offerings (IPOs). But the order, issued on 18 September 2025, has opened up a larger debate on whether IPO advisers should be categorised and regulated as merchant bankers and raised fresh concerns about SEBI’s own inconsistent and lackadaisical examination process.
The regulator’s own Merchant Bankers Regulations, 1992, define a merchant banker broadly to include 'any person engaged in the business of issue management, either as manager, consultant, adviser, or by rendering corporate advisory services'. Read literally, this definition appears to bring IPO advisors within SEBI’s regulatory fold. However, in practice, SEBI has allowed companies to appoint advisors alongside the lead merchant bankers without requiring them to be registered. Statutory auditors, legal counsels and other advisors are engaged without registration and SEBI has not objected in prior cases.
SEBI's chief general manager (CGM) in the quasi-judicial cell, Santosh Kumar Shukla, observed this contradiction in his order, noting that while regulations technically require advisors to register as merchant bankers, SEBI’s own practice and approvals have consistently allowed otherwise. “Conspicuous regulatory acquiescence has been given in enforcing SEBI Issue of Capital and Disclosure Requirements (ICDR) Regulations to allow advisers in relation to issue without insisting registration as merchant banker,” the order pointed out.
“It is important to mention that for exercising the choice to issue such directions, authority must be guided by the principles of consistency and proportionality. The current proceedings do not entail restorative justice practice as no victim restitution is contemplated and action results to the prejudice of Neomile Corporate Advisory without any charge of impinging market integrity or investor protection rather for penalising the noticee. Thus, the trade-off tends to be made more in favour of consistency and proportionality,” the CGM says.
The case against Neomile Corporate Advisory stemmed from website disclosures that inaccurately described the firm as a SEBI-registered merchant banker. Neomile admitted the error, claiming it arose during a website migration in early 2024 and was corrected once SEBI flagged it. Despite SEBI’s preliminary examination concluding that Neomile Corporate Advisory had not acted as an unregistered merchant banker—since registered lead managers were responsible for due diligence in all IPOs—the regulator still issued a show cause notice (SCN), threatening serious enforcement action.
The latest order strongly criticised this inconsistency. While in a similar case involving Value Square Capital, SEBI imposed only a minor penalty of Rs1 lakh, Neomile Corporate Advisory was pursued more aggressively even though it had promptly corrected the misstatement. Mr Shukla warned SEBI against arbitrary enforcement, reminding it of Supreme Court rulings requiring regulators to act with clarity, consistency and predictability.
The order also highlighted SEBI’s lack of thoroughness: there was little attempt to verify Neomile’s explanation, no examination of whether issuers or lead managers were misled, and no correlation shown between the website error and IPO activities. Indeed, SEBI itself had vetted and approved offer documents in IPOs where Neomile was disclosed openly as 'advisor to the company', raising no objections at the time.
While Neomile Corporate Advisory has escaped punitive action, the case leaves the market with a troubling lack of clarity. Advisers play a significant role in the IPOs of small and medium enterprises (SMEs) and main-board listings; yet, SEBI’s regulations and practice remain at odds. The order itself notes that unless the terms 'adviser' and 'consultant' in the merchant banker regulations are clarified, such cases will continue to arise, leaving issuers, advisors and investors in regulatory limbo.
For now, the order closes the matter against Neomile Corporate Advisory, but it has reignited questions about regulatory certainty in India’s capital markets and whether SEBI is doing enough to provide clear, consistent rules on the role and responsibilities of IPO advisors.
