The Securities and Exchange Board of India (Sebi) board on Friday tightened the disclosure norms for companies tapping public markets, allowing them to disclose key performance indicators (KPIs) based on past transactions and past fundraising. Pricing details needed to be shared.
The regulator asked companies, including new-age technology companies, to disclose transaction prices for fresh issuance, secondary sale or acquisition of shares prior to the initial public offering (IPO) during a period of 18 months.
“If no such transaction takes place during the period of 18 months prior to the IPO, the information shall be disclosed for the value per share of the issuing company based on the last five primary or secondary transactions, which were more than three years prior to the IPO. Not out of date,” the regulator said.
Several new-age companies including Zomato, Paytm, Cartrade Tech and Nykaa went public in Indian capital markets in 2021, many of which are now trading below their issue prices.
Yash Ashar, Partner and Head of Capital Markets, Cyril Amarchand Mangaldas, said, “The regulator had for several months questioned the details of past issues including pricing of issues and key performance indicators. They have now mandated this disclosure, including on secondary transfers. Some of these may not be known to the issuer. However, now they have to be provided. In addition, independent directors are now required to consider the issue price. While one can understand the regulator’s concerns on pricing, pushing it to independent directors may be challenging for some of them as they may not have the necessary background to approve it.”
In addition, the Committee of Independent Directors will have to recommend that the price band is appropriate based on quantitative factors such as key performance indicators as compared to the weighted average cost of acquisition of the primary issue or secondary transaction.
The regulator has taken a liberal approach by making pre-filing of documents optional for companies.
SEBI’s board has also approved the proposal to bring buying and selling by mutual funds under insider trading rules.
The 2020 Franklin Templeton episode in which some executives were accused of insider trading prompted the capital markets regulator to take this step.
The board also approved relaxation in open offer pricing norms for disinvestment of public sector undertakings.
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