CONFIDENTIAL IPO FILING (Syllabus: GS Paper 3 – Economy)

Context: Several companies have opted for confidential pre-filing of initial public offering (IPO) papers, the latest being Swiggy.

Confidential IPO Filing

• About: It is an optional mechanism enabled by Securities and Exchange Board of India (Sebi) in 2022, by making amendments to the Issue of Capital and Disclosure Regulations (ICDR).
• Confidential Nature: Unlike the traditional route, pre-filings of PDRHP are kept confidential from the public.
• This confidentiality allows companies to strategize and plan without immediate market scrutiny.
• Timing Determination: The Company retains the discretion to decide when to make the DRHP public, including determining the timing of the issue.

Have Indian firms taken this route?

• Tata Play was the first Indian firm to undertake confidential IPO filings in December 2022.
• Oravel Stays, the parent company of Oyo, and Swiggy are among the notable Indian firms that have followed this approach.
• Global Practice: US, the UK and Canada have a practice where prior to filing, the offer documents can be submitted for preliminary review by regulatory authorities.

Advantages

• Protecting Sensitive Data: Business filings contain sensitive information such as financial data and trade secrets.
• Confidential filings prevent competitors from accessing strategic plans and market strategies.
• Safeguarding Issuers’ Interests: Confidential filing protects issuers in case they decide to cancel their IPO plans.
• Enhanced Due Diligence: Pre-filing confidential IPO papers enable due diligence discussions with regulatory authorities.
• Compliance Preparation: Confidential filing provides time to ensure compliance with regulatory requirements.

Disadvantages

• This can disrupt investor expectations. 
• The process of pre-filing confidential IPO papers, with PDRHP (pre-filed DRHP), UDRHP 1 (updated DRHP), UDRHP 2, etc., can be more complex and time-consuming compared to the traditional route. 
• This can result in higher IPO expenses, including legal and advisory fees.