MUMBAI: The Securities and Exchange Board of India (SEBI) is considering a product that combines rights issues and preferential allotments to expedite fundraising, as it believes this would cut the required time by half.
The capital market regulator’s objective is to simplify the fundraising process by eliminating the need for a merchant banker and Sebi’s approval. The regulator is also working on a model document that would help speed up approvals for initial public offerings (IPO).
Sebi chairperson Madhabi Puri Buch said on Friday that a combo product of rights issues and preferential allotments would bring out the best of both. “The entire end-to-end processing time will be cut down to half from the current 42 days,” she said.
For an already-listed company going the ‘rights’ way to preferential allotment, there is no need for Sebi to come in the way, Buch said, adding a consultation paper is in the works. “Companies will only be required to submit details of the purpose of the fundraise and how the funds will be utilised, she said.
The Sebi chairperson observed that the proposed template of an offer document is an attempt at “demystifying” the process of filing papers for an IPO which currently calls for a complex draft red herring prospectus (DRHP). Such a document, Buch said, will require companies to simply “fill in the blanks” for an approval and will have a separate section to explain any complexities. “The document will be precise and meaningful, without unnecessary details. There will be a separate column to articulate any variations or complexities,” she said at a capital market conference organised by industry body Ficci.
Separately, Sebi is also developing an AI-based tool for processing IPO documents and it is expected to be in place by December, she said. This tool will make the fast-track issue mechanism redundant as the normal approval process itself would become very fast.
Erroneous IPO applications are “cluttering the path” for good ones in getting approval. The market regulator is using artificial intelligence for faster processing of public documents and 80% of the work done is through that technology, the Sebi chairperson said.
Commenting on delays in clearing IPOs, the Sebi chairperson said that many filings were incomplete, lacking the necessary approvals and consistency. Sebi has taken the approach of returning such faulty applications to make way for well-prepared IPO applications.
“We return the documents to de-clutter the path so that the genuine applications are not delayed,” Buch said, pointing out that there are eight IPO applications which have crossed the three-month threshold due to lack of due diligence.
Sebi is also working on a performance validation agency, streamlining disclosures in the form of key performance indicators (KPIs) for loss-making companies in listing. She said the industry standard forum is working on possible solutions to problems faced with these KPIs and its suggestions will be available in a month.
Source: The Financial Express
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