SEBI to Bring in Stringent Disclosure Requirements for Companies Going Public

SEBI is reportedly ramping up transparency demands for companies eyeing IPOs to speed up public offerings in the primary market

India's market regulator has mandated that companies planning to go public must provide more information to expedite public offerings in the primary market. In a letter sent to merchant bankers last week, the regulator outlined 31 additional required disclosures.

According to a report by Reuters, these include the details about any conflicts of interest involving management, directors, major shareholders, subsidiaries, and third-party service providers.

The market watchdog, SEBI (Securities and Exchange Board of India) has found discrepancies in the information provided by companies in their public offering documents. As per sources cited in the report, these gaps in information cause clearance delays.

"If a draft offer document contains these (additional) disclosures it will be cleared faster," this source stated.

This development comes at a time when primary markets are witnessing increased activity due to a rising number of IPOs (Initial Public Offerings).

While SEBI's average clearance time for public issues has reduced, the market regulator wants to further decrease this time. This year, SEBI took less than 90 days on average to clear public issues, compared to 108 days in 2023 and 126 days in 2022.

As per data compiled by Prime Database, 107 companies raised 864.92 billion rupees ($10.41 billion) through public offers in FY24. Post that, almost nine companies have raised nearly 325.45 billion rupees through listing.

SEBI has instructed firms to declare that employee stock options have been allocated exclusively to employees and that proceeds from pre-public offers will be used solely for general commercial purposes.

The regulator has also mandated the disclosure of all existing agreements and arrangements among shareholders. "The lead merchant bankers to the public issues will have to ensure that the additional disclosures are made."

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