In a bid to make the public listing process more flexible, SEBI ntroduced the confidential IPO filing route on 21 November 2022, through circular SEBI/LAD-NRO/GN/2022/107.. This lesser known but powerful mechanism allows companies to file their draft offer documents confidentially, get regulatory feedback and refine their approach before facing the public.
Unlike the traditional IPO process where documents are made public from day one, this route gives companies a space to iterate and prepare thoroughly. It also helps in mitigating reputational risk in case the IPO is delayed or withdrawn. As Indian capital markets evolve and adopt global best practices, this mechanism will become a preferred option for many high growth companies.
This article breaks down everything you need to know about confidential IPO filings in India – from how it works, pros and cons, real world examples and what it means for investors, founders and the broader capital markets.
What is a Confidential IPO Filing in India?
A confidential IPO filing allows companies to submit their Draft Red Herring Prospectus (DRHP) to SEBI and stock exchanges without making the information public. This was enabled through a SEBI amendment in 2022. The pre-filing route is designed to encourage IPOs especially during volatile market periods when companies may want regulatory feedback before deciding on listing.
How the Pre-Filing Framework Works (Step-by-Step)
Here is a summary of key phases:
- Filing of Pre-Filing Draft Offer Document (PDRHP) confidentially with SEBI.
- SEBI review and observation letter.
- Filing of Updated DRHP-I (UDRHP-I) for public view (minimum 21 days).
- Filing of UDRHP-II with updates from public comments.
- Final filing of Red Herring Prospectus (RHP) with RoC and SEBI.
- Launch of IPO.
Key Features:
- Available to mainboard IPO candidates.
- Initial submission stays confidential until SEBI provides observations.
- Companies can rework, delay, or withdraw the offering without public attention.
- After receiving SEBI approval, the DRHP must be made public at least 21 days before the IPO roadshow begins.
- Validity: Company must launch the IPO within 18 months of SEBI’s final observations.
- SEBI-registered merchant bankers must lead the process.
SEBI vs. U.S. Model: Key Differences
| Feature | India (SEBI) | U.S. (SEC / JOBS Act) |
|---|---|---|
| Confidential Filing Allowed | Yes (2022) | Yes (2012) |
| Applies To | Mainboard IPOs | Emerging Growth Companies |
| Regulator Feedback Phase | Confidential | Confidential |
| Testing the Waters (TTW) | Not permitted | Permitted for EGCs |
| Public Disclosure Timing | Post-SEBI approval | At company’s discretion (before roadshow) |
India’s version is stricter and more regulator-driven. Unlike in the U.S., where companies have broad flexibility to pitch investors early via TTW, Indian firms are barred from market outreach until their DRHP is made public.
Why Are Indian Companies Using It?
Indian startups and growth-stage firms often operate in fast-evolving industries where timing and perception matter. Confidential filings give companies:
- Flexibility to align IPO with market conditions.
- Time to address SEBI observations before public scrutiny.
- Reputation Shielding in case the offering is postponed or withdrawn.
- Less Media Pressure during financial and legal fine-tuning.
Additionally, in a media-sensitive market like India, where public filings often trigger premature headlines, confidential filings help companies manage the story. This control over narrative is particularly useful for companies still fine-tuning their financials or resolving regulatory compliance issues.
Notable users of the confidential route include Tata Capital, Imagine Marketing (boAt), Shiprocket, and Physicswallah, all of which navigated volatile valuation climates and regulatory hurdles.
Benefits of Confidential IPO Filing
- Avoid Market Sentiment Shocks: Indian markets are highly reactive. Confidential IPO filings shield companies from premature public reactions.
- Control the Narrative: Helps founders and PR teams build the story only when the offer is ready.
- Competitive Discretion: Avoid giving away sensitive business details to rivals.
- Private Iteration: Enables quiet back-and-forth with SEBI on complex issues like promoter structure, litigations, or risk factors.
- Test Readiness: Gives promoters and institutional stakeholders time to ensure financials, governance, and corporate structure are investor-ready.
- Leverage SEBI Feedback: Companies can modify key metrics and risk disclosures before they hit public scrutiny.
Confidential IPO Filing: Drawbacks and Limitations
- Reduced Retail Engagement: Investors, especially retail participants, miss early signals and may feel under-informed.
- SEBI Observations Still Mandatory: Unlike the U.S., Indian companies must go through the full review before going public.
- No Testing the Waters (TTW): Cannot legally market or gauge investor interest before public DRHP.
- Media Silence Can Hurt Momentum: Some IPOs benefit from pre-IPO buzz and market chatter—this route limits that.
- Uncertain Outcomes: Confidential filing does not guarantee a successful IPO; the market window could still close before launch.
- Limited Data Transparency: Analysts and media have less time to scrutinize financials and raise red flags.
What It Means for Retail Investors
- DRHP becomes public only 21 days before roadshows, leaving less time for deep due diligence.
- Investors should monitor news around pre-filings of IPO and track updates through SEBI’s website and media reports.
- GMP (Grey Market Premium) chatter often begins after the public DRHP—so stay alert for late surges in sentiment.
- Retail investors must be nimble and quick in evaluating companies that take this route. Learning to read DRHPs efficiently becomes crucial.
Legal and Compliance Considerations
- Only SEBI-registered merchant bankers can file on behalf of companies.
- Regulatory review remains rigorous, but without public pressure.
- SEBI allows companies to refile corrected or revised documents if required.
- Companies must comply with existing eligibility norms such as profitability track record or net worth thresholds, depending on the listing board.
Global Context
- U.S.: Over 90% of tech IPOs since 2012 used confidential filing. The flexibility offered by the JOBS Act gave rise to a surge in startup listings.
- India: Still early-stage, but expected to grow with startup IPO activity. As of 2024, fewer than 10 companies had used the confidential route publicly.
- UK, EU, and Hong Kong: Limited or no confidential pre-filing frameworks. Most regulators still emphasize early disclosure and public review.
Future Outlook
- As more Indian startups mature, expect increased use of confidential filings to reduce IPO risk.
- SEBI may expand this option to SME platforms or allow hybrid models in the future.
- Could attract more foreign institutional investors (FIIs) who prefer lower-volatility listing processes.
- Increased adoption could lead to better-regulated disclosures and more structured DRHP formats.
- Over time, the confidential route could encourage companies to list sooner rather than waiting for perfect market conditions.
Final Thoughts
Confidential IPO filing is not a loophole—it’s a strategic option that offers flexibility, protects reputation, and enables iterative regulatory feedback. But it also limits early public transparency, which can disadvantage retail investors.
For founders, this is a powerful but subtle tool in navigating India’s evolving capital markets. It’s a way to de-risk the listing journey while preparing for long-term scrutiny. For investors, it calls for sharper vigilance and quicker analysis.
As SEBI refines the process and more companies explore this path, confidential filings could become a central feature of India’s IPO landscape.
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