- New disclosure rules target companies planning IPOs
- The regulator aims to curb pre-listing price speculation
- Organizations must provide key performance indicators
- Information on past share prices and performance is also required
MUMBAI, Sept 30 (Reuters) – India’s market regulator on Friday ordered expanded disclosure standards for IPO-bound companies amid concerns that traditional financial disclosures are inadequate for some companies, which typically make losses over an extended period.
The Securities and Exchange Board of India said after a meeting of its board that companies were required to disclose key performance indicators, details of how shares have been priced based on past transactions and past fundraising from their investors.
“The working hypothesis here is that the indicators that the company itself monitors internally and has shared with its early private equity investors…these are the parameters that would be equally relevant to the retail investor,” SEBI Chair Madhabi Puri Buch said .
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“There should be no information asymmetry,” she added.
Reuters reported in March that SEBI had begun asking IPO hopes for such details even before proposals were finalized, unnerving bankers and companies fearing delays in their IPO plans. Continue reading
The board also allowed companies planning a public listing to submit a confidential “pre-filing” document – a practice practiced in the United States and Canada – to protect their sensitive business information. Continue reading
Analysts believe the move is in the right direction.
“This will go a long way in preventing price speculation, which currently occurs well before the certainty of an IPO,” said Arka Mookerjee, a partner at JSA, a national law firm in India.
SEBI also said the board has approved changes to insider trading regulations to include mutual funds within its scope.
The move comes more than a year after SEBI accused an executive at US money manager Franklin Templeton (FT) and his family members of using non-public information to steal shares in about $4 million in Franklin debt funds to sell, which closed weeks later, causing panic among investors.
Insider trading rules in India apply to those who deal in listed securities while in possession of unpublished price-sensitive information.
Separately, SEBI has also provided more flexibility in the approval process for the appointment and removal of independent directors from the Board.
Among other changes, the market regulator also said it would facilitate faster payout of redemptions to mutual fund unitholders.
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Reporting by Abhirup Roy in Mumbai; Additional reporting by Shilpa Jamkhandikar and Nupur Anand; Edited by Andrew Heavens and Raissa Kasolowsky
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