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Sebi mulls confidential ‘pre-filing’ of IPO documents

In the discussion paper, Sebi said pre-filing of documents would be done confidentially with the regulator and the exchanges, and a public announcement would only be made on filing of the same by the issuer.

The issuer would be required to file an updated DRHP (UDRHP -I) – which shall be made available to the public. The issuer and LMs (lead managers to the issue) can undertake marketing of the issue only after the filing of the UDRHP-I.
The issuer would be required to file an updated DRHP (UDRHP -I) – which shall be made available to the public. The issuer and LMs (lead managers to the issue) can undertake marketing of the issue only after the filing of the UDRHP-I.

The Securities and Exchange Board of India (Sebi) on Wednesday issued a consultation paper seeking comments from public on whether the regulator should permit ‘pre-filing’ of offer documents by companies. According to the regulator, companies had raised concerns over sensitive information in offer documents turning out to be beneficial to competitors, without the certainty that the initial public issuance will be executed. Sebi said, “The primary market advisory committee (PMAC) deliberated the matter and favorably considered permitting “pre-filed” document with Sebi to ease the concerns highlighted.”

In the discussion paper, Sebi said pre-filing of documents would be done confidentially with the regulator and the exchanges, and a public announcement would only be made on filing of the same by the issuer.

Pursuant to observation from Sebi, the issuer may decide to pursue undertaking an IPO based on market conditions and its own financial requirements, Sebi said. The issuer would be required to file an updated DRHP (UDRHP -I) – which shall be made available to the public. The issuer and LMs (lead managers to the issue) can undertake marketing of the issue only after the filing of the UDRHP-I.

Experts believe that the move will highly safeguard sensitive business information of companies. “In the current situation, even if the company decides not to finally come up with the IPO due to market conditions or some regulatory non-approvals, the data in DRHP is available to the public and can be used by competitors. So without raising funds, all the information gets diluted for everyone. In the new system, this will be taken care of and confidentiality will be maintained,” Ashish Rathi, whole time director, HDFC Securities, told FE.

Globally, many jurisdictions such as the UK, Canada and the US permit pre-filing of the offer document for review by the regulatory authority. Subsequently, in case issuers decide to proceed with the offer, the document incorporating changes mandated by the regulator is made available to public.

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