SEBI’s New Regulations on IPOs: What Investors Need to Know

Are you looking to invest in an IPO? Well, you may want to take a step back and read this first. 

SEBI, the market regulator, is taking a tough stance on initial public offerings (IPOs) after several high-profile IPOs in 2021 resulted in investor losses. SEBI’s recent crackdown has resulted in the regulator returning the preliminary papers of half a dozen companies, including hospitality chain operator OYO and mobile maker Lava International. These companies have been directed to re-file their draft red herring prospectus (DRHP) with updates, which has caused delays in their IPO launches.

The list of companies whose DRHP returned by SEBI is as follows:

OYO, Go Digit General Insurance Ltd, Lava International, Paymate India, Fincare Small Finance Bank India, BVG India

What is DRHP?

A DRHP, Offer Document, or Preliminary Registration Document is a version of the RHP that is not yet finalized or is in the draft stage. Before an IPO, it must be submitted to SEBI, and when SEBI confirms, approves, or suggests changes, the RHP is then considered to be in its final form.

SEBI’s actions demonstrate its commitment to ensuring greater transparency and accountability in the IPO process. This is a positive development for investors, who will now have access to more accurate and reliable information before making investment decisions. However, the recent crackdown may impact the number of IPOs hitting the market this year, given the extremely volatile market conditions and jittery investor sentiments.

This current action plan of SEBI sends a clear message to merchant bankers that they must strictly adhere to the list of information needed to provide the draft prospectus and disclose all relevant information well in advance. This is a step towards making the IPO process more rigorous and stringent and improving the overall quality of IPOs in the market.

Investors need to exercise caution and conduct thorough due diligence before investing in any IPO. As SEBI continues to hold companies to a higher standard of transparency and accountability, it is crucial for investors to keep an eye on SEBI’s actions and the IPO landscape. Ultimately, investors must do their own research while applying for IPOs and avoid high-priced issues.

So, if you’re planning to invest in an IPO, make sure you do your homework thoroughly and stay informed about SEBI’s actions, which are aimed at making the IPO process more accountable and open.



Disclaimer: Investments in the securities market are subject to market risks; read all the related documents carefully before investing.