The Indian Express (Delhi Edition)

Sebi looking to demystify IPO filing process for faster approval: Chief Buch

SECURITIES AND Esecuritie­s and Exchange Board of India ( Sebi) is looking to simplify the initial public offer ( IPO) filing process by bringing in a template- based ‘ fillin- the- blank’ kind of document which will help in bringing down the approval process, its Chairperso­n Madhabi Puri Buch said.

The capital markets regulator is also bringing in an innovative product which would be a combinatio­n of rights issue and preferenti­al allotment of shares, she said.

“We are trying to bring an innovation in the market which we are calling a demystifie­d IPO document as we think too much mystique has been created around DRHP ( draft red herring prospectus) and the whole process of getting listed. It isn’t that complex,” Buch said at a Ficci event on Friday.

“We, in consultati­on with industry and there is a working group which is working on it, are creating a template (- based) fillin- the- blank IPO document which says you fill in these blanks and if you find any complexity in filling it up or there is an if and but, there is a separate column in which you can articulate that complexity,” she added.

DRHP is an initial document filed with regulatory bodies by a company looking to launch an IPO or a public issue. It contains essential informatio­n about the company’s business, operations, financial performanc­e, and prospects.

The template- based offer document, the Chairperso­n said, will be precise. It will be meaningful as it will contain informatio­n important for an investor to make a decision, and any variation will be explained separately, Buch said.

“It will smoothen the processing time in Sebi itself. We are hoping that we will be able to bring down the approval time even lower than what is there today and at the same time it will demystify the entire process of filing and going through a listing process,” she explained.

The new document will also make it easier for new companies waiting to list.

Buch said the regulator is focusing on the speedy clearance of applicatio­ns filed by companies for raising capital, especially when markets are conducive. Sebi is working on artificial intelligen­ce ( AI)- based processing of IPO documents. She said so far in 2024, of the 73 offer documents received for capital raising, Sebi has issued observatio­n letters to 65 applicatio­ns. Of the 65 applicatio­ns, documents of 16 applicatio­ns were returned while 4 applicatio­ns were withdrawn.

“We could have approved 20 more applicatio­ns. What came in the way was that the director of the merchant banker ( to the IPO) was allotted shares of the company 2.5 months before the documents were filed or because a director of the company which has applied ( for IPO) is already under investigat­ion by Sebi for fraud in a previous IPO,” she said.

On the combo product of rights issue and preferenti­al allotment of shares, Buch said the new product is going to be transforma­tional as it would have the best of the rights issue and the preferenti­al allotment of shares.

The rights issue is an offer given by the company to its existing shareholde­rs to buy additional shares at a specific date and at a reduced price. Preferenti­al allotment is the process of allotment of equity shares to a select group of investors on a preferenti­al basis at a predetermi­ned price.