Sebi on Wednesday proposed introducing an alternative regulatory review mechanism by allowing “pre-filing” of the offering document for companies considering IPOs. Under the proposal, an issuer would have to “pre-file” the offering document with Sebi and exchanges without making it publicly available for an initial review period only, according to a consultation paper.
The document must contain all the information currently required under the ICDR regulations (capital issuance and disclosure requirements). Typically, the current initial public offering (IPO) process involves at least 30-70 days after the filing of the draft Red Herring Prospectus (DRHP) before the issuing company can access the capital markets. Additionally, the issuing company may choose not to proceed with its IPO after going through the process.
Sebi noted that one of the concerns of IPOs is the disclosure of sensitive information in the DRHP, which can benefit its competitors, without the certainty that the IPO will be executed.
“Another concern relates to the timing of the public offering in relation to market conditions. Any delay due to such factors raises concerns about the ‘recency’ of feedback obtained from potential institutional investors during road shows, thus impacting the pricing, as well as the estimation of the size of the problem,” Sebi noted.
To allay concerns, the Primary Market Advisory Committee (PMAC) discussed the matter and favorably considered allowing a “pre-filed” document with Sebi. The Securities and Exchange Board of India (Sebi) has invited public comments on the proposal until June 6.
Globally, many jurisdictions such as the United Kingdom, Canada, and the United States allow the offering document to be pre-filed for review by the regulator. In the consultation document, Sebi suggested that an issuer make a public announcement that it has pre-filed the offering document with Sebi and exchanges. The issuing company must mention that the pre-filing of the offering document does not necessarily mean that the issuer will proceed with the IPO.
The Issuer and Lead Arrangers must also agree not to undertake any marketing or advertising campaign that refers to its intended IPO or presents key performance indicators by any means to the public, including social media. In addition, exchanges must provide an approval in principle on the pre-filed document and Sebi must provide comments on the pre-filed document within 30 days of receipt of the Principal Investment Banker’s response to the clarification. or approval in principle of the stock. Exchanges.
Following receipt of Sebi’s submissions, an issuer, if it wishes based on market conditions and its own financial needs, may decide to proceed with the IPO. In this regard, the issuer was asked to file an updated DRHP, a public document, containing all of the observations provided by Sebi. The updated HDRD must be available on the websites of the issuing company, major investment bankers, stock exchanges and Sebi for a period of at least 21 days for public comment.
The issuer and the main investment bankers can only undertake the marketing of the issue after the updated filing of the DRHP. In addition, investment bankers upon expiry of the 21-day period must file with Sebi details of comments received by them or the issuer from the public. He must also submit the consequent changes, if any, that must be made to the draft information memorandum.
The regulator should take note of the changes to the updated DRHP and thereafter the issuer may file the HPR, a public document, with the Registrar of Companies, the stock exchange(s) and Sebi. The subsequent procedure with regard to the announcement of the price band/opening of the issue will remain the same.
First post: STI