To expedite public offerings in the primary market, India's market regulator SEBI has mandated that companies planning to go public must provide more information. The regulator outlined 31 additional required disclosures in a letter sent to merchant bankers last week.
As per Reuters, these disclosures will include the details about any conflicts of interest which involve directors, crucial shareholders, management, subsidiaries, and other third-party service providers.
As the watchdog, Securities and Exchange Board of India (SEBI) has found discrepancies in the information which are being provided by companies in their public offering documents. These gaps in information cause clearance delays as per sources cited in the report.
The source stated, "If a draft offer document contains these (additional) disclosures it will be cleared faster."
Due to a rising number of IPOs (Initial Public Offerings), this development comes at a time when primary markets are witnessing increased activity.
Furthermore, the market regulator wants to further decrease this time while SEBI's average clearance time for public issues has reduced. For instance, SEBI took less than 90 days on average to clear public issues this year if we compare it to 108 days in 2023 and 126 days in 2022.
Additionally, if we consider the data compiled by Prime Database, 107 companies raised 864.92 billion rupees (USD 10.41 billion) through public offerings in the 2024 financial year. Post which, almost nine companies have raised nearly INR 325.45 billion rupees through listing.
SEBI has instructed firms to declare that employee stock options have been allocated exclusively to employees. And, this will proceed from pre-public offers that will be used solely for general commercial purposes.
The regulator has also made it a mandate for the disclosure of all existing agreements and arrangements among the shareholders. "The lead merchant bankers to the public issues will have to ensure that the additional disclosures are made," highlighted SEBI.
