Audio-Visual Disclosures for Better Understanding: SEBI’s New IPO Regulations

New regulations by the Securities and Exchange Board of India (SEBI), the capital market regulator, require companies launching an IPO to make audio-visual disclosures. In a recent circular, it has been stated that SEBI requires every disclosure made in a Draft Red Herring Prospectus (DRHP), Red Herring Prospectus (RHP), and price band advertisement for main-board public issues to be in audio-visual form so as to increase investor comprehension.

Mandatory AV Disclosures

According to SEBI, the AV content should contain a disclaimer advising investors against any dependence on any other documents or contents regarding this public offer which may be found on the internet, online websites, social media platforms, or microblogging sites by financial influencers.

Objective of the New Regulations

The move is aimed at making it easier for investors to know what is being talked about in relation to the characteristics of public issues and company details. “Based on comments received from various stakeholders, it has been decided that salient disclosures made in the Draft Red Herring Prospectus (DRHP), Red Herring Prospectus (RHP), and Price Band Advertisement for public issues shall also be made available in Audio Visual format (AV) for ease in understanding the features of public issues. Such AV shall be prepared and placed in the public domain for all main board public issues,” states SEBI’s circular.

Contents of the AV Disclosures

The guidelines stipulate that these DRHP-like materials must cover:

• Business of the company
• Promoters
• Management
• Financial information
• Pending legal matters
• Risks
• Other relevant details

Distribution and Accessibility

The AV should distribute its content equitably across different sections of DRHP and RHP as emphasized by SEBI. Specific sections include information about the Company, Risk Factors, Capital Structure,

Objectives of the offer, Business Operations, Promoters, Management,

Financial summaries, Litigations, Material developments, and Terms of the Offer. The content must be factual, non-repetitive, non-promotional, and must not be misleading in any way.

Availability and Language

The AV shall be uploaded on the website of the Issuer and Association of Investment Bankers of India (AIBI) within 5 working days of filing DRHP with SEBI. However for cases such as pre-filing of draft offer documents under CHAPTER IIA of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018, the AV shall be made available within 5 working days from filing Updated Draft Red Herring Prospectus -I. The AV will be accessible on the issuer’s website and social media channels as well as on the AIBI website. Additionally, it will also be provided through a QR code inside the offer documents. Only this information should be relied upon by investors while disregarding all other related content shared through social media or sent by financial influencers.

Initially, these videos will be available in both English as well as Hindi.

Implementation Timeline

For companies filing DRHPs from July 1st, it is a voluntary guideline but after October 1st it will become mandatory for draft documents filed.

These steps are designed to enhance transparency and make it easier for investors to understand details regarding public issues ensuring a more informed investment decision-making process.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.