The Securities and Exchange Board of India (SEBI) in its board meeting on 30 September announced a number of modifications to various laws, which included stricter disclosure rules for initial public offerings (IPOs). The SEBI board meeting also voted to loosen the pricing guidelines for open offers.
For IPOs, the SEBI approved a plan that required issuers to submit disclosure of key performance indicators (KPIs) and price per share of issuer based on historical transactions and past fundraising efforts.
“The board approved the proposal to mandate the issuers coming out with IPOs, to make disclosure of KPIs and price per share of issuer based on past transactions and past fundraising done by the issuer from the investors under ‘basis for issue price’ section of the offer document, and in price band advertisement,” said the SEBI statement.
According to the new norms, the IPO issuer must provide information about the pricing of shares based on previous transactions and investor fundraising done in the 18 months prior to the IPO.
If there are no such transactions, information regarding the issuer company’s share price based on the latest five primary or secondary transactions, not older than three years prior to the IPO, must be reported. The revised norms allow IPO issuers the option to pre-file offer documents.
“Pre-filing mechanism allows issuers to carry out limited interaction without having to make any sensitive information public,” said the SEBI statement. “Further, the document which incorporates SEBI’s initial observations would be available to investors for a period of at least 21 days, assisting them better in their investment decision making process.”
The existing mechanism of processing offer documents will continue in addition to this alternative mechanism of pre-filing.