Tata's direct-to-home arm flags off private IPO filing in India

The idea is to have control over information flow and keep sensitive information from competitors.
Tata's direct-to-home arm flags off private IPO filing in India
Photo: Shailesh Andrade (Reuters)
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Direct-to-home service provider Tata Play has become the first Indian company to take the newly introduced private filing route for its initial public offering (IPO).

The Walt Disney Company-backed firm announced this in a newspaper advertisement published yesterday (Dec. 01). The company looks to raise about 3,000 crore rupees ($369.2 million) through a mix of fresh and secondary share sales using the private IPO filing route, according to a Business Standard report.

India’s capital markets regulator Securities and Exchange Board of India (SEBI) introduced the confidential IPO filing option on Nov. 03, looking to safeguard new businesses from rivals’ stratagems.

Under this framework, much in use in countries like the US and UK, an unlisted company can keep its offer document private until the regulator has issued its observations. A final IPO plan is then filed by the company, only after which can it be fully marketed.

Why confidential filing of IPOs?

In recent years, the IPOs of prominent companies such as Paytm, Zomato, Nykaa, Fino Payments Bank, and Cartrade Tech have failed badly. Some of them have lost all their listing gains and are now trading below their listing price.

Often, despite SEBI’s approval, companies have suspended their IPOs after seeing their prospects diminish post-publication of crucial information during the filing itself.

Sebi has since intensified the scrutiny of IPO filings, especially for newer companies.

While private filing is only optional, more companies are likely to choose it, experts believe. This would protect them from excessive criticism over pricing, ownership, and profitability, among other things. It would reduce the hampering of investor demand for IPOs, minimizing the effect on the post-listing business.

“The biggest motivation is that disclosures don’t become public until approved by Sebi. The public does not know about the competitive positioning, group company, and related party disclosures,” Pranjal Srivastava, partner-investment banking at Centrum Capital, told Business Standard.

“That’s the reason it is going to be popular. Many times when you file, you are not sure you will get the response or even the valuation,” Srivastava said.