SEBI working on a model offer document for firms to 'fill in the blanks' to get IPO approvals, says Buch

On Friday, SEBI chairperson Madhabi Puri Buch said the capital markets regulator is working on a mechanism to expedite IPO approvals, where companies can simply fill in the blanks in a template to get the go-ahead for IPOs. Separately, SEBI is also developing an artificial intelligence tool to check IPO documents being filed by companies for faster approvals, Buch said speaking at the Capam event of FICCI, adding that this tool should be in place by December.

Stating that a mystique has been built around the IPO process, like filing of a complex draft red herring prospectus, Buch said the attempt is to demystify the process now. Elaborating on the "demystified offer document" aspect, Buch said SEBI is working on a process which will have a template where companies can just fill in the blanks to prepare the IPO document.

There will be a separate column for articulating any complexities and explaining the variations on a particular aspect, she said.

"The document will be precise, meaningful and any variation will be explained separately," she said, adding that the new process will smoothen the processing time and also demystify the process. She, however, did not spell out a timeline for implementation of the plan, or also the process that will be followed in the run up.

Apart from this, the regulator is also working on a new process of fundraising for listed companies, which will be a combination of rights issue and a preferential allotment. The overall duration for end-to-end process for getting the go-aheads will nearly halve to 23 days from the present 42 days for preferential issues, which is the fastest route of fundraise, she said.

Under the innovation, the watchdog is eliminating the need for getting approval from SEBI and will also do away with the requirement for merchant bankers as the fundraising document will be a simple two-page one listing out the necessary details for investors precisely.

Buch said this innovation, which will potentially deprive merchant bankers of the fees, is a homegrown solution and the idea has not come from the industry. SEBI will be bringing a consultation paper on this idea before moving ahead with the proposal, she said, adding that the process will be cost-effective and faster.

Buch said making the IPO process faster has been a key objective for her, and pointed that there are eight applications which have exceeded the three month threshold at present due to lack of necessary regulatory approvals, judicial interventions and some non-compliances.

She also said that SEBI has taken an approach where it prefers to return documents when it discovers things like conflict of interest at merchant bankers' ends, directors being accused of fraud, objects of issue not being clear or it being simply incomplete.

"We return the documents to unclutter the path, so that the genuine applications are not delayed," she added.

The new system of demystified offer document will help the young companies in its listing process, Buch said, adding that SEBI is also working on rationalising the disclosures to be made by a loss-making company in its listing.
The possible solutions will be out in a month, she said, adding that the solutions are being found courtesy the deliberations at the Industry Standard Forum (ISF). The SEBI management will also be taking the ISF to its board with the intent of formalising it, she said.

The board will also be seen deliberating on a proposal to streamline the ongoing disclosures to be made under the listing obligation and disclosure requirements (LODR) framework, which have been formulated in consultation with the industry.

To help the errant companies who are in violation of securities laws, the regulator has also put in place a settlement amount calculator on its website, she said. It is also working on a benchmarking agency which will help compare the performance of infrastructure investment trusts and real estate infrastructure trusts, she said.

Buch also urged the market ecosystem to swiftly adopt solutions offered by regulatory technology companies, adding that this is necessary because the regulator is adopting supervisory technology (SupTech) solutions at a fast pace. Speaking at the same event, largest equity bourse NSE's chief executive and managing director Ashish Kumar Chauhan urged small investors to desist from trading in derivatives.

He said buying in the morning and selling in the evening should not be confused with "investing", and pitched for right regulations and compliance to it amid the "euphoria". FICCI's president and auto major Mahindra and Mahindra's chief executive Anish Shah said it is necessary for the private companies to push the pedal on investments for driving economic growth.

He said for the last three-four years, India's growth is led by government capital expenditures and private capex has been lagging.