Confidential filing of IPOs are gaining speed in India, as companies keep a low profile while they do their preparation work and wait for the weak secondary market to improve.
Online education provider Physics Wallah is the latest company with plans to confidentially file for a US$400m–$500m domestic IPO this month, people with knowledge of the transaction said. Axis Capital, Goldman Sachs, JP Morgan and Kotak are the banks on the deal.
Consumer electronics maker boAt Lifestyle, officially called lmagine Marketing, also plans to confidentially file for an up to Rs20bn (US$230m) float over the next few weeks. In 2022, the company shelved a Rs20bn IPO, which did not make use of a confidential filing, because of volatile market conditions and weak valuations for technology companies. Goldman Sachs, ICICI Securities, JM Financial and Nomura are working on the IPO.
"Issuers do not want to expose themselves to prolonged public scrutiny especially when it is becoming harder to launch deals," a Mumbai-based ECM banker said.
The benchmark BSE Sensex index is down 5% year to date and the broader BSE 500 index has fallen 8.5%. As a result there have been fewer IPOs and block launches this year compared with 2024.
The confidential filing route has been available since 2022, when the Securities and Exchange Board of India allowed an unlisted company to keep its offer document private until it gets regulatory approval and firms up the IPO launch. The confidential filing is open for scrutiny by the regulator and the stock exchanges but not the public. The document is made public for 21 days once regulatory approval is given. In normal filings the draft prospectus is accessible to all even as the regulator is examining it.
Another advantage of confidential filing is that the Sebi approval for an IPO is valid for 18 months while in a regular IPO the issuer has to launch the deal within 12 months of the nod.
Food delivery company Swiggy was the first issuer using the confidential filing process successfully. It completed a Rs113bn IPO last year, followed by retailer Vishal Mega Mart's Rs80bn float, which also used the confidential route.
Limited marketing
Initially favoured by technology and e-commerce companies, even brick-and-mortar companies such as Vishal Mega Mart, fertility clinic chain Indira IVF (US$400m) and education loan provider Credila Financial Services (US$500m) have opted for the confidential filing route.
Still some bankers do not think there will be a huge rush for confidential filings as Sebi takes a longer time to approve such IPOs. Normal IPOs are approved within three to four months while confidential filings take five to six months. "When the going is good, issuers want to hit the market as soon as possible," another ECM banker said.
Furthermore, Sebi allows only limited marketing of IPOs and solely to institutions when an issue is filed confidentially. Only the information that is disclosed in the confidential filing can be shared with potential investors and no earnings or valuation projections can be shared.
"It is very hard to market such deals to institutions. Local mutual funds prefer the document to be in the public space for a longer time so that their analysts can give them an informed view," the second ECM banker said. "I am not a great fan of confidential filing. When a company has decided to go public it is only fair that the information be available to investors at all times."