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19 Nov 2024
The Securities and Exchange Board of India (SEBI) has been speeding up the approval process for initial public offerings (IPOs) to keep pace with India's active primary market. On average, SEBI took 107 days to approve IPOs in FY24, a 17% reduction from 129 days in FY23, based on PRIME Database data.
Several factors contribute to this expedited approval process, including an increase in SEBI's workforce, the use of artificial intelligence (AI) tools, and self-certifications by merchant bankers, according to investment bankers.
Some IPOs have been approved in under two months, such as those for Ideaforge Technologies, Aadhar Housing Finance, Brainbees Solutions, Bharti Hexacom, Cello World, and Indian Renewable Energy Development Agency.
Ramnish Kochgave, president of investment banking at Elara Capital, explained that the speed of approval is significantly influenced by the quality of the Draft Red Herring Prospectus (DRHP). High-quality bankers and lawyers meticulously address SEBI’s rejection criteria before submission, resulting in fewer SEBI observations. He noted that document quality has markedly improved over the years.
The primary market has experienced a notable increase in activity over the past three years. In FY24, SEBI provided final observations on 72 DRHPs, up from 63 in FY23. Market experts expect this number to grow further in FY25.
An investment banker highlighted that SEBI has made significant improvements in its IPO process management. SEBI now requires more self-certifications from merchant bankers, adding an extra compliance layer alongside company secretary certifications.
Additionally, SEBI ensures that merchant bankers and lawyers are well-informed about expectations for draft IPO documents, which has further expedited the process.
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