New Delhi
Sebi on Wednesday proposed introducing an alternative mechanism for regulatory review by permitting “pre-filing” of offer documents for companies contemplating initial public offerings.
Under the proposal, an issuer should make pre-filing of offer document with Sebi and stock exchanges without making it available for the public for an initial scrutiny period only, according to a consultation paper.
The document should contain all disclosures as required currently under the ICDR (Issue of Capital and Disclosure Requirements) Regulations. Generally, the current process for an Initial Public Offering (IPO) entails at least 30 to 70 days after filing of Draft Red Herring Prospectus (DRHP) before the issuer company can access capital markets.
Further, the issuer company may choose to not pursue coming out with its IPO after undergoing the process. Sebi noted that one of the concerns for issuer companies was the disclosure of sensitive information in the DRHP, which may be beneficial to its competitors, without the certainty that the IPO would be executed.
“Another concern is with regards to timing the public issue vis-a-vis market conditions. Any delay due to such factors results in concerns regarding the ‘recency’ of the feedback obtained from potential institutional investors during the roadshows, thus impacting the pricing as well estimating the issue size,” Sebi noted.
To ease the concerns, the Primary Market Advisory Committee (PMAC) discussed the matter and favourably considered permitting “pre-filed” document with Sebi.
The Securities and Exchange Board of India (Sebi) has sought comments from the public on the proposal till June 6. Globally, many jurisdictions such as UK, Canada, and US permit pre-filing of the offer document for review by the regulatory authority.
