What is confidential IPO filing, and how is it different from regular DRHP?

SUMMARY

Certain companies choose to file IPOs confidentially to shield their sensitive information, like financial details and market strategies, protect their interests, and improve due diligence.

Online education platform PhysicsWallah has opted for a confidential pre-filing route for its initial public offering. Tata Group's financial services arm Tata Capital will also reportedly file a draft red herring prospectus for its mega IPO via a confidential route. In the past, Tata Play, Vishal Mega Mart, and Swiggy had also used this filing option. As the confidential pre-filing route is gaining traction among companies, let's discuss what it is and how it is different from a regular DRHP.

What is a confidential IPO filing?

'Pre-filing' or DRHP via confidential route is an optional mechanism for issuers seeking to launch a mainboard initial public offer (IPO). Market regulator Securities and Exchange Board of India (SEBI) enabled this option in December 2022. The confidential filing contains all details and disclosures as currently needed for the filing of DRHP, but the only difference is that details are not made public.

Some companies prefer confidential IPO filings to protect their sensitive data, such as financials and market strategies, safeguard their interests, and enhance due diligence.

The confidential filing makes the IPO paper available to the public after the firm files an updated DRHP after SEBI issues its observations on DRHP.

If the companies prefer the regular DRHP route, they can market their initial public offer whenever they need. However, in confidential filing, the company can market their offer after updated DRHP is filed.

SEBI provides an 18-month period to launch an IPO for companies that choose the pre-filing route, unlike those preferring the traditional method, which has a 12-month timeline.

Confidential IPO filing is a new concept in India, but is a common practice in countries like the United Kingdom, the United States, and Canada.

How is confidential pre-filing different from regular DRHP?