SEBI’s Empowering IPO Proposal for Retail Investors

Imagine a bustling stock exchange floor, where investors are scanning heaps of information from complex reports, analyst calls and legal documents to find the next promising IPO opportunity to invest their hard-earned money. All this while the air is also crackling with anticipated excitement as a company prepares to go public for raising risk capital.

In this high-stakes arena, the Securities and Exchange Board of India (SEBI) emerges as the vigilant guardian, ensuring that investors have a fair shot at understanding the game. SEBI is undertaking moves strategically to decode what exactly lies within the Draft Red Herring Prospectus (DRHP), a cryptic document hard to understand by ordinary investors.

SEBI is taking bold steps to wield its regulatory wand to protect investors to unravel the intricate dance of disclosure, transparency, and critical information to give investors the confidence to invest in IPOs with confidence.

SEBI is proposing a few groundbreaking initiatives that aim to empower investors by ensuring transparent and comprehensive information is available during public offerings. SEBI aims to enhance transparency, accessibility, and investor understanding during the process of raising capital through public offerings. The proposal seeks to provide investors with an easier way to comprehend key features and disclosures related to public issues.

Let’s delve into the recent proposal by the Securities and Exchange Board of India (SEBI) specifically focusing on Draft Red Herring Prospectus (DRHP) and Red Herring Prospectus (RHP) for companies willing to list on Indian exchanges.

What is the Current Process:

• Companies planning to go public file a DRHP with SEBI and stock exchanges.
• SEBI reviews the DRHP and provides observations.
• After addressing these observations, the company files the RHP with SEBI and the Registrar of Companies (ROC).
• Investors rely on the RHP for making informed investment decisions.

What is the Proposed Innovative Proposal?

• SEBI proposes that the disclosures made in DRHP and RHP should also be made available in Audiovisual (AV) format.
• Issuer companies desiring to list on the main board will create AV presentations.
• These presentations will be bilingual (in English and Hindi) and accessible to the public.
• The AV format aims to simplify understanding and reference various disclosures related to the proposed public issue.

Details of the proposed AV Format:

• The duration of each bilingual AV must be a maximum of 8 minutes.
• Issuers and lead managers must publish the AV within 5 working days during the submission and resubmission of DRHP.
• The AV will be available on digital/social media platforms of the issuer and the Association of Investment Bankers of India (AIBI).
• Web links to the AV will be provided on stock exchange websites and accessible via QR codes related to the public issue.
• Lead managers share joint responsibility for the content and information in the AV.

In summary, SEBI’s proposal aims to empower retail investors with easy access to critical disclosures and ensure they are comprehensible to investors, fostering greater confidence in the Indian capital markets.