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Regulator tightens disclosure rules for firms readying IPOs

Sebi chairperson Madhabi Puri Buch. The markets regulator wants firms to disclose key performance indicators and share pricing details.  (PTI)Premium
Sebi chairperson Madhabi Puri Buch. The markets regulator wants firms to disclose key performance indicators and share pricing details.  (PTI)

  • The regulator also asked companies, including new-age technology companies, to disclose transaction prices of new issues of shares, secondary sales or acquisition of shares during the 18-month period before the initial public offering

The board of the Securities and Exchange Board of India (Sebi) on Friday tightened disclosure norms for companies tapping public markets, requiring them to disclose key performance indicators (KPIs) and share pricing details based on past transactions and previous fundraisings.

The regulator also asked companies, including new-age technology companies, to disclose transaction prices of new issues of shares, secondary sales or acquisition of shares during the 18-month period before the initial public offering.

“In case there are no such transactions during the 18 months period prior to the IPO, then the information shall be disclosed for price per share of the issuer company based on last five primary or secondary transactions, not older than three years prior to the IPO," the regulator said.

The Indian capital markets in 2021 saw a slew of new-age companies, including Zomato, Paytm, Cartrade Tech, and Nykaa, go public, with many of them now trading below their issue prices.

Yash Ashar, partner and head of capital markets, Cyril Amarchand Mangaldas, said, “The regulator had for several months increased the questioning on the pricing of issues and the details of previous issues, including key performance indicators. They have now made this disclosure mandatory, including for secondary transfers. Some of this may not be known to the issuer. However, they will now have to be provided. Additionally, independent directors are now required to look at the issue price. While one can understand the concerns of the regulator on pricing, pushing this on independent directors may make it challenging for some of them as they may not have the necessary background to approve this."

In addition, the committee of independent directors will have to recommend that the price band is justified based on quantitative factors such as key performance indicators vis-a-vis the weighted average cost of acquisition of primary issuance or secondary transactions.

The regulator has taken a liberal approach by making it optional for companies to pre-file documents.

The Sebi board also approved the proposal to bring buying and selling by mutual funds under insider trading rules.

The Franklin Templeton episode of 2020 in which some executives were accused of insider trading prompted the capital markets regulator to take this step.

The board also approved the relaxation of open offer pricing norms for the disinvestment of public sector undertakings.

ABOUT THE AUTHOR

Priyanka Gawande

Priyanka Gawande is a senior legal correspondent at Mint. She has worked as legal reporter for four years with both television and digital mediums. Based in Mumbai, she reports on disputes across sectors including banking, corporates and finance. This also includes insolvency and bankruptcy cases and intellectual property rights (IPR) litigation. Her focus also comprises tracking capital markets and disputes relating to securities law. Previously, Priyanka worked with Informist Media for 2.5 years covering major insolvency and bankruptcy cases and corporate developments. She started her career in journalism with Business Television India (BTVi) where she reported on primary markets, banking, finance and insurance companies.
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