These disclosures will have to be made in DRHP, SEBI's effort to speed up the IPO approval process

IPO DRHP Approval: In order to expedite the IPO approval process, market regulator Securities and Exchange Board of India (SEBI) has asked lead managers to provide additional details while filing draft prospectus. The market regulator last week sent a letter to bankers regarding over two dozen new disclosure rules.

89 days after IPO DRHP approval

The DRHP is a document that companies launching an IPO have to submit to the market regulator. Data from Prime Database shows that SEBI took an average of 126 days to approve an IPO in 2022 and 108 days in 2023. According to the data, out of over 45 applications submitted after January 1, 2024, only 9 were approved. It took an average of 89 days to get approval. However, about half a dozen of these applications were withdrawn or cancelled.

14 under IPO approval process

SEBI is studying the IPO DRHP approval of 14 companies. According to the SEBI notification, 14 IPOs are under the approval process. While 19 IPOs are awaiting SEBI's response on the clarifications of lead managers or clarifications of lead managers regarding DRHP.

These details should be mentioned in the DRHP for quick approval

The additional disclosures sought by Sebi include pre-IPO placement details, shareholder details, previous agreements, ESOP allotment details and other additional information. A legal analyst said these additional disclosures could reduce the time taken for approval of IPO applications, but the level of details sought could increase the work to be done by merchant bankers before filing the DRHP. As per the new guidelines, lead managers will have to confirm that the allottees under the ESOP are only employees, disclose the name and price of the shareholder on the day of allotment and disclose suppliers or customers in case of pre-IPO placement.