Sebi Chairman Tuhin Kanta Pandey delivered a strong message to companies on Thursday. He emphasized the need for greater attention to disclosures in offer documents for public offers. Speaking at the 14th annual convention of the Association of Investment Bankers in India in Mumbai, Pandey highlighted specific areas requiring improvement.
Key Disclosure Gaps Identified
Pandey pointed out recurring disclosure gaps that reduce transparency and investor understanding. These gaps often extend the time taken for Sebi to clear IPO documents. This delay stretches the overall timeline for companies to raise funds. The Sebi chief identified several critical areas where disclosures must be sharper.
Areas Needing Immediate Attention
- Risk Factors: Companies must provide clearer and more comprehensive risk assessments.
- Valuation Rationale: Detailed explanations for company valuations are essential.
- Objects of the Issue: The purposes for raising funds should be explicitly stated.
- Use of Proceeds: Transparent breakdowns of how raised capital will be utilized.
Pandey stressed that inadequate disclosures weaken investor comprehension of offer documents. He called for greater business model clarity, with transparent revenue and cost drivers. The management discussion and analysis should move beyond mere narration. It should explain both internal and external drivers of performance.
NSE Settlement Case Progress
In a related development, Pandey confirmed that Sebi has agreed to NSE's settlement plea. This case involves allegations of unfair market access during the early 2010s. NSE was accused of offering preferential access to select brokers on its derivatives trading server.
A Singapore-based whistle-blower initially exposed the wrongdoing. Sebi's investigations into this matter have been a significant hurdle. They have delayed NSE's plans to go public through an IPO. The exchange has been attempting to list for nearly a decade.
An amicable resolution of this long-pending case would bring NSE closer to its listing goals. This settlement marks a crucial step forward for the country's largest stock exchange.
The Sebi chief's remarks underscore a dual focus. He aims to enhance market transparency while facilitating smoother regulatory processes. Companies must now prioritize detailed and honest disclosures to avoid delays and build investor trust.
