SEBI mulls ‘pre-filed’ document for IPO-bound firms to maintain secrecy 

The Securities and Exchange Board of India (SEBI) has sought feedback on allowing a ‘pre-filed’ offer document to be filed by companies that are planning an initial public offer (IPO).  

The document can be filed with the market regulator and the exchanges without initially making it available for the public, as per a discussion paper released by the markets regulator on Wednesday. 

The genesis of the suggestion is the fact that the draft red herring prospectus (DRHP), which IPO-bound companies have to file and is available in the public domain, contains sensitive information about the company and even after all the regulatory approvals, at times the IPO doesn’t happen due to various reasons, including market volatility. 

“It is gathered that 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,” stated the SEBI paper. 

The capital market regulator has suggested that companies be allowed to file a ‘pre-filed’ document with SEBI and the stock exchanges that would contain all disclosures mandated under the Issue of Capital and Disclosure Requirements Regulations. 

While the company will have to disclose that it has filed such a document, it will not be available in public domain. Thereafter, if the company decides to go-ahead with an IPO, then it will have to file an updated DRHP, which would be available in the public domain as well. 

“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,” stated the SEBI paper. 

“The UDRHP-I shall be available on websites of issuer company, LMs (lead managers), 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,” it added. 

SEBI has sought public feedback on the proposals till June 6.