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Call for Inputs: SEBI's Consultation Paper on Pre-filing of Offer Document in case of IPO
Call for Inputs: SEBI's Consultation Paper on Pre-filing of Offer Document in case of IPO

May 19, 2022

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SEBI has released a Consultation Paper seeking suggestions on the proposal to introduce pre-filing of offer documentation in case of Initial Public Offer (IPO).

Concern raised by SEBI: 

  1. Generally, the process of an 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, an issuer company may choose to not pursue coming out with its IPO after undergoing the above process. Accordingly, one of the concerns for issuer companies is disclosure of sensitive information in the DRHP, which may be beneficial to its competitors, without the certainty that the initial public issuance would be executed.
  2. Any delay in the timing of public issue due to market conditions 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.
  3. Updated information in the Red Herring Prospectus (which has incorporated SEBI observations and latest financials) for consumption of investors is not available in public domain for a significantly longer period of time.

SEBI's proposal and questions for consultation:

  1. Should SEBI introduce an alternative mechanism for regulatory review of offer document by permitting “pre-filing” of offer document for issuers contemplating IPO?

If the answer/ views to the above query is in the affirmative then comments are sought on the following procedure for pre-filling:

  1.  Issuer makes “pre-filing” of offer document with SEBI and Stock Exchanges without making it available for public for an initial scrutiny period only. This document shall contain all disclosures as required currently under ICDR Regulations.
  2. Issuer shall make a public announcement stating that it has done pre-filing of offer document with SEBI and Stock Exchanges. The issuer company shall state that pre-filing of offer document need not necessarily mean that the issuer shall undertake IPO. The issuer and lead managers (LMs) shall also submit an undertaking that it shall undertake no marketing/ advertising campaign which refers to its intended IPO or showcases any key performance indicators through any means to public including social media.
  3. Stock Exchanges shall provide in-principle approval on the pre-filed document.
  4. SEBI shall provide its observations on the pre-filed document within 30 days from the receipt of reply to clarification from LM/ in-principle approval from stock exchange(s).
  5. Pursuant to receipt of SEBI observations, an issuer, if it so desires based on market conditions and its own financial requirements, may decide to pursue undertaking IPO. For this purpose, the issuer shall file an updated DRHP (UDRHP -I), a public document, incorporating all observations provided by SEBI.
  6. The UDRHP-I shall be available on websites of issuer company, LMs, stock exchanges and SEBI for period of at least 21 days for public comments. The issuer and LMs can undertake marketing of the issue only post UDRHP-I filing.
  7. LMs shall upon expiry of the period of 21 days shall file with SEBI details of the comments received by them or the issuer from public. It shall also submit the consequent changes, if any, that are required to be made in the draft offer document. The document shall be termed as UDRHP-II.
  8. SEBI shall take note of the changes made to the UDRHP-II.
  9. An issuer may file the RHP, a public document, with Registrar of Companies, Stock Exchange(s) and SEBI. The subsequent procedure with respect to price band advertisement/issue opening shall remain the same.

The consultation paper is attached for your reference. If this topic is of interest toy ou, kindly write to garima@nasscom.in or tejasvi@nasscom.in with your comments/inputs, latest by May 29, 2022.


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Consultation Paper_DRHP.pdf

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Garima Prakash
Manager, Public Policy and Government Affairs

Reach out to me for all things policy about e-commerce, international trade, export controls, start-ups and fintech

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