Sebi set to allow confidential pre-filing of IPO documents

Mumbai: The Securities and Exchange Board of India (Sebi) is set to allow companies holding initial public offerings (IPOs) to submit confidential pre-filing of offer documents; relax open offer pricing norms for the disinvestment of public sector undertakings (PSUs); and seek enhanced disclosures from startups in offer documents on the IPO issue price.

The regulator’s board, which will meet on September 30, will also clear a proposal to bring buying and selling by mutual funds under insider trading rules; they are currently excluded. The move comes in the wake of the Franklin Templeton episode in which some executives were accused of insider trading.


Companies only have to make a public announcement that they have pre-filed offer documents with Sebi and exchanges. The issuer company will also have to state that pre-filing doesn’t necessarily mean it will hold an IPO.

Significant for New-age Cos

“The mechanism of pre-filing or confidential filing is a well-established concept in the US,” said Mehul Savla, partner, RippleWave Equity Advisors. “This was introduced by the SEC (the US Securities and Exchange Commission) in 2012 to spur IPOs by emerging growth companies. The same has been extended to all companies in 2017 and companies like AirBnB and Uber have taken advantage of this.” Apart from the US, the UK and Canada are among those that permit pre-filing of offer documents for review by the regulator.

“The move by Sebi is very progressive and will be particularly advantageous to new-age, high-growth companies to maintain confidentiality of financials and operational data in a competitive environment,” Savla said. “The mechanism will be more effective if the public notice period is reduced from 21 days to two weeks.”

The few months of data confidentiality will be significant for high-growth firms compared with more mature ones that have steady state revenues and margins.

PSU pricing

The regulator’s board may also approve a proposal to ease certain provisions of the takeover code for disinvestment of PSUs. It aims to scrap the need to take into account the 60-day, volume-weighted average market price for calculating the open offer price for the disinvestment of PSUs and for indirect acquisition of any other company in which the PSU has a stake.

The regulator had said information about a strategic disinvestment becomes public at the time of cabinet approval and subsequent announcements are made at different stages, affecting the market price of the PSU concerned.

“The PSU divestment process is already based on competitive bidding and hence ensures the best price for all shareholders, thus ensuring that even minority shareholders interests are adequately protected,” Savla said. “The removal of market-linked offer price criteria will spur greater participation and hence better price discovery.”

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