Sebi to end wordy agony of IPOs

Plans to prune offer documents to 10 pages

The Securities and Exchange Board of India ( Sebi) has indicated it will not allow wordy or incomprehensible Initial Public Offering ( IPO) documents.

(IPO is the act of offering the stock of a company on a public stock exchange for the first time.) "Very soon, we will come out with ( rules for an) abridged prospectus... It will be really understandable for investors. Whatever ( information) is required to take well informed decisions will be available in 10 pages," said P K Nagpal, executive director, Sebi.

He was speaking at an event here, organised by the PHD Chamber of Commerce and Industry.

As a rule, IPO documents run into hundreds of pages and investors often find it difficult to comprehend the key information.

What Sebi appears to be planning is to have a rule that the entire offer document only be available on a soft copy format on the websites of Sebi, the company in question and the investment bankers to an IPO.

The 10- page abridgement would have details about the companys promoters, pertinent litigation and materially important subsidiaries, said people in the know. “Retail investors are generally not inclined to read the many- page document and sometimes miss the important bit in the overload of information. An abridged version would ensure they have the relevant information and also reduce the burden on companies (in printing and distributing the entire thing, among others),” said V Jayasankar, head of equity capital markets, Kotak Investment Banking.

Prithvi Haldea, chairman, Prime Database, says a shortened version of the offer document with all the relevant information will help investors. “ The abridged prospectus would ensure that investors have all the material information to make an informed decision. Where investors need more details, they can always access the entire document,” he said.

Nagpal recounted some recent steps by Sebi on related matters. Recently, for instance, it had approved electronic IPOs, to help cut the interval till listing time to only seven days. Also, the regulator has quickened the clearance process, and allowed more companies tap the fast- track route for a rights issue and follow- on offers.

Sebi had earlier reshuffled its corporate finance division to ensure smoothening of the process. It is also said to be working on asystem- driven disclosure regime for listed companies, to help improve monitoring of insider trading and any lapse in corporate governance. The idea is that the proposed system use technology for automatic gathering and integration of information.

Business Standard, New Delhi, 13th Oct. 2015

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