The first suggestion was about “time to market.” As someone aptly put it, the only thing predictable about the market is its unpredictability. Therefore, the time required to access the market becomes extremely important.
Our processes for rights issues, QIPs, and preferential issues have become very efficient. However, Initial Public Offerings (IPOs) still take a significant amount of time, though it is much less than before.
Filing for an IPO in India involves submitting a Draft Red Herring Prospectus (DRHP) to SEBI, which requires meeting extensive disclosure requirements. Following this, companies must obtain in-principle approval from the stock exchanges and address SEBI’s observations.
Once these are incorporated, the issuer can file the Red Herring Prospectus (RHP) based on market conditions and feedback. This entire process typically takes 60 to 90 days after the initial DRHP submission. The regulator has made significant strides in reducing the IPO timeline.In an effort to further streamline and expedite the IPO process, the regulator plans to “demystify DRHP” by creating a fill-in-the-blanks template. This approach aims to make the document precise, and meaningful, and ensure standardization across different DRHPs.This initiative will leverage technological tools like Artificial Intelligence (AI) to streamline processing, reduce listing approval time, cut costs, and enhance overall market efficiency.The second initiative announced by the Chairperson pertains to follow-on fundraising. Once a company is listed, it can raise additional capital through a rights issue, QIP, or preferential allotment.
Follow-on offerings are particularly sensitive to market timing because the stock is constantly trading and its price fluctuates continuously. This makes deal pricing very dynamic, with precise timing being crucial. While the regulatory framework has improved significantly, there is still room for further enhancement.
Many companies prefer raising funds through rights issues or preferential allotments. For FY24, equity issuance via rights issues was approximately Rs 15,110 crore, while preferential allotments amounted to around Rs 45,100 crore.
To streamline these processes further, the regulator plans to introduce a combined rights issue and preferential allotment product. This innovation will use a simple two-page document, reducing the end-to-end timeline to 23 days from the current 42 days for preferential allotments. Creating a clear and straightforward framework for follow-on capital raises is crucial for the markets.
In summary, any initiative to improve the efficiency in the market is very welcome!
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