1. It is an optional alternative mechanism for the purpose of IPO on Main Board.
2. SEBI introduced this amendment with the aim of safeguarding sensitive business information in the Draft Red Herring Prospectus (DRHP), particularly at the time where there is an uncertainty that whether the IPO will be executed or not.
3. Recently Swiggy has adopted this approach of filing its IPO with SEBI.
Process
- Issuers are required to file the pre-filling offer Document with SEBI and the Stock Exchanges and the same shall not be available in public domain.
- The Lead Merchant Banker shall summit to SEBI the following Documents along with pre-filed draft offer document:
(a) A certificate confirming that an agreement is enetered between issuer and lead merchant banker
(b) Due diligence certificate
(c) An undertaking from the issuer and lead merchant banker that they shall not conduct marketing or advertisement for intended issue.
- The Public Communications must be consistent with the past practices issued between the date of Boards Meeting in which public issue has been approved till the date of filing of updated draft red herring prospectus-I(UDRHP-I) or withdrawal of pre-filing DRHP.
- The issuer shall make public announcement within two days of filling pre-filing draft offer document disclosing the fact of filing of pre-filing draft offer document without providing any other details in relation to the issue.
- The SEBI may recommend changes or issue observations within 30 days from the later of the following
(a) Date of receipt of pre-filing of draft offer document.
(b) Date of receipt of satisfactory reply from lead manager, where the SEBI has sought for such clarification or reply from lead manager.
(c) Date of receipt of clarification or information from any regulator or agency, where SEBI has sought for clarification or information from such regulator or agency.
(d) Date of receipt of in-principal approval from Stock Exchanges
(e) Date of intimation of completion of interactionwith QIB’s in terms of regulation 59D of SEBI (ICDR) Regulations, 2018.
(f) Date of intimation about the conversion of outstanding convertible securities or exercise of any other right which would entitle any person to receive equity shares in terms of regulation 59Eof SEBI (ICDR) Regulations, 2018.
- The issuer and lead merchant banker shall carry out such changes as recommended by SEBI and shall submit to SEBI, an updated draft red herring prospectus-I (UDRHP-I).
- The URDHP-I shall made available for public comments for a period of 21 days from the date of filling, by hosting the same on the websites of SEBI, Stock Exchanges and Lead Merchant Banker of the issue.
- The issuer shall make public announcement within two days of filling of UDRHP-1, disclosing the fact of filing of UDRHP-I and inviting comments from Public.
- The Lead Merchant Banker after expiry of 21 days file with SEBI the comments received by them or the issuer from public on UDRHP-I and any consequential changes, if any that are required to be made in UDRHP-I..
- The issuer and the lead manager shall carry out such changes in the UDRHP-I and shall submit to the Board an UDRHP-II before filing the offer document with the Registrar of Companies or an appropriate authority, as applicable.
- A public issue may be opened within 18 months from the date of issuance of the observations by the SEBI. However, the issuer shall file UDRHP-I with the SEBI and the stock exchanges within 16 months from the date of issuance of the observations by the SEBI.
Note: The provisions of Chapter II of SEBI (ICDR) Regulations, 2018 apply mutatis mutandis to IPOs with a Pre-filed DRHP under Chapter IIA. However, Regulations 8 (additional conditions for offer for sale) and 15 (securities ineligible for minimum promoters’ contribution) will apply at the time of filing the UDRHP-I instead of the Pre-filed DRHP. Thus, the one year prior holding period, which was required to be complied with by selling shareholders offering their shares for sale in an IPO will be considered from the date of filing of the UDRHP-I, and not the Pre-filed DRHP.
Interaction with Qualified Institutional Buyer
An issuer may interact with QIB’s for limited marketing from the time of filing pre-filing draft offer document till the SEBI issue any changes. The Issuer and Lead Merchant Banker shall prepare the list of QIB’s who have participated in this interaction and submit a confirmation of closure of OIB’s interaction to SEBI.
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