The Securities and Exchange Board of India (SEBI) is taking significant strides to simplify and expedite the Initial Public Offering (IPO) process. At a recent industry event, SEBI Chairperson Madhabi Puri Buch unveiled plans for a new 'fill-in-the-blanks' template for IPO-bound companies to use when filing their offer documents. This initiative aims to make the documents easier for investors to understand and speed up the approval process through the use of artificial intelligence (AI).
The new template will allow companies to provide precise and meaningful information while also offering separate sections to explain any complexities related to the offerings. This approach aims to demystify the Draft Red Herring Prospectus (DRHP) and the overall IPO process, which Buch noted has become unnecessarily complicated. By making the process more straightforward, SEBI hopes to reduce the time it takes for IPO approvals and make it easier for companies to list.
Currently, companies seeking to raise approximately ₹80,000 crore have their offer documents filed with SEBI. The influx of applications has prompted SEBI to reallocate resources to manage the workload. The new template-based system is expected to streamline this process, reducing the burden on both the regulator and the companies.
In addition to the new IPO template, SEBI is working on a mechanism that combines the processes for obtaining regulatory approval for rights issues and preferential allotments. The aim is to create a two-page document containing all relevant information, potentially halving the time required for approval. This new process is also expected to be more cost-effective by minimizing the need for merchant bankers' intervention.
During the same event, SEBI's Whole-Time Member Kamlesh Chandra Varshney announced plans to regulate financial influencers. SEBI is finalizing a consultation paper to establish rules that will eliminate the impact of unregulated influencers on the market.
SEBI is focusing on ensuring the speedy clearance of applications for raising capital, particularly when market conditions are favorable. The regulator is leveraging AI to process IPO documents more quickly. So far in 2024, SEBI has received 73 offer documents for capital raising, issued observation letters for 65, returned 16, and had 4 applications withdrawn.
However, the approval process for some applications was delayed due to issues such as recent share allocations to directors of merchant bankers or ongoing investigations into company directors for previous IPO frauds.
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