CHANGES MADE TO INITIAL PUBLIC OFFERINGS (IPO)

• Financial statements: Reduced the period of disclosure of restated consolidated financial statements for IPOs from 5 years to 3 years and any stub period. (Impact: Standalone financial statements need not be disclosed instead, the same needs to be uploaded on the website of the Issuer)
• Price band: Reduced the timeline for announcement of floor price or price band from 5 to2 working days for IPOs. (Impact: Minimising impact of volatility in markets on the IPO)
• Conversion of securities offered in the IPO closer to launch of IPO: Conditions for offer for sale have been relaxed permitting conversion of fully paid up compulsorily convertible securities offered in the IPO prior to filing of the offer document (Red herring prospectus) instead of the draft offer document (draft red herring prospectus). (Impact: It permits selling shareholders to hold the shares proposed to be sold in the IPO as convertible securities at the draft offer document stage and convert such securities closer to the launch of the IPO.)
• Standalone financial information: Issuers are required to upload standalone audited financial statements of the issuer and its material subsidiaries (subsidiaries contributing 10% or more of the consolidated turnover, net-worth or profit before tax of the issuer ) for the three full financial years preceding the date of filing of offer document, on the issuer’s website. (Impact: Reduced financial due diligence by the lead manager)
• Proforma Financial Information: In the event, the Issuer or its subsidiaries have made a material acquisition or divestment (including acquisition or divestment and any deemed disposal) after the latest period for which financial information is provided, then Proforma financial information is required to be disclosed. (Impact: It will increase and widens the scope of disclosure requirements and also all the transactions need to be disclosed as the parameter for assessing the materiality criteria has been changed from asset and turnover to net worth, profit before tax and turnover)
• Pledge of locked in securities: Pledge of locked-in securities post IPO with NBFC and a housing finance company in addition to scheduled commercial banks or public financial institutions is permitted. (Impact: Increased category of lenders from whom finance may be availed and transfer of
• Specified securities not permitted until the lock-in period)
• Group CompanyLitigation: The definition of “Group Companies” under the ICDR has drastically changed. It specifically exclude promoters and any subsidiaries of the Issuer and include such companies with which the Issuer had related party transactions during the period for which financial information is disclosed in the offer document. Further, it will contain only those litigations involving a group company which has a material impact on the issuer. The board of directors of the issuer would be required to analyse litigation involving such material group companies and determine whether such litigation has a material impact on the issuer and disclose these litigations in the offer document. (Impact: This new disclosure would substantially reduce the due diligence to be made on litigation disclosures and would also reduce the size of the offer document. Many litigations which are not material to the issuer eliminated thus, it will not confuse the Investors from judging from the point of risk factors. Also, this does not permit issuers to apply materiality to the related party transactions and accordingly, all related parties which had transactions during the period for which financial information is disclosed as per the Accounting Standard would be required to be disclosed along with other corporate information)