Editor’s note: This is general educational information about how India’s public issue disclosure rules work. It is not investment advice, it does not describe any particular company or offering, and it rests on the official sources listed at the end.
The protection India gives a retail applicant in a public issue is not a judgement about whether the shares are worth buying. The Securities and Exchange Board of India does not pass on the merits of an offer. What the ICDR Regulations do instead is fix what must be written down, who is answerable for it, how long the public gets to look at it before money moves, and what happens to the intermediaries when the process fails. The result is a document with a defined content list and a chain of liability behind it.
The standard the document has to meet
Regulation 24 states the test in one line: the draft offer document and offer document shall contain all material disclosures which are true and adequate to enable the applicants to take an informed investment decision. The red herring prospectus and the prospectus must carry the disclosures specified in the Companies Act, 2013 and those in Part A of Schedule VI of the regulations. The lead managers must exercise due diligence and satisfy themselves about the veracity and adequacy of what is disclosed, and they must call on the issuer, its promoters, its directors, and any selling shareholders to meet the obligations they have set out in the document. There is a freshness rule as well: the restated audited financial statements in the offer document cannot be more than six months old at the issue opening date.
Filing is a two stage affair. Under regulation 25 the issuer files three copies of the draft offer document with the Board through the lead managers, with a due diligence certificate, and files it with the exchanges as well, submitting the permanent account number, bank account number and passport number of individual promoters, or the registration details and Registrar of Companies address where a promoter is a body corporate. The Board may specify changes or issue observations within thirty days of receiving the draft or of receiving a satisfactory reply from the lead managers.
The public reading period
Regulation 26 turns the draft into a public document before it becomes an offer. The draft offer document must be hosted for at least twenty one days, along with the draft abridged prospectus, on the websites of the issuer, the Board, the exchanges where listing is proposed and the lead managers. Within two working days of filing, the issuer publishes a public announcement in one English national daily, one Hindi national daily and one regional language daily circulating where its registered office is, disclosing the filing and inviting the public to send comments to the Board, the issuer or the lead managers. After the period closes, the lead managers must file with the Board the comments received and the consequential changes made to the document. The versions hosted online must match the versions filed with the Registrar of Companies, the Board and the exchanges.
The abridged prospectus is the version most retail applicants actually read, and SEBI has written rules about its honesty rather than only its length. Under a circular dated February 04, 2022, now carried in the master circular, qualitative statements in the abridged prospectus must be substantiated with key performance indicators and other quantitative factors, and no qualitative statement may be made that cannot be substantiated with those indicators. A QR code on the front page, the abridged prospectus and the price band advertisement must lead to the full prospectus, abridged prospectus and price band advertisement. From April 1, 2025, issuers and merchant bankers must follow industry standards for identifying and disclosing those key performance indicators, formulated by an Industry Standards Forum of ASSOCHAM, CII and FICCI under the aegis of the exchanges in consultation with SEBI.
Since a circular dated May 24, 2024, main board issuers must also put the salient disclosures of the draft red herring prospectus, red herring prospectus and price band advertisement into an audiovisual presentation, bilingual in English and Hindi with the Hindi version in Devanagari script, running approximately 10 minutes, with the time equitably distributed across the company, risk factors, capital structure, objects of the offer, business, promoters, management, financial information, litigations, material developments and the terms of the offer. The content must be factual, non-repetitive and non-promotional. It must be uploaded within 5 working days of the filing of the draft red herring prospectus and must carry an instruction to investors not to rely on material about the issue circulated by finfluencers on the internet, websites, social media or micro-blogging platforms.
Price disclosure and the ban on inducements
Face value must be disclosed in the draft offer document, the offer document, advertisements and application forms in the same font size as the price band or issue price. Under regulation 127 the cap of a price band cannot exceed one hundred and twenty per cent of the floor price and cannot be less than one hundred and five per cent of it, and the band must be announced at least two working days before bidding opens, with the relevant financial ratios computed at both ends. Regulation 37 prohibits anyone connected with the issue from offering any incentive, direct or indirect, in cash, kind or services, to any person for making an application, other than fees or commission for services rendered.
Analysis: where the protection actually sits
The architecture is procedural, and reading it that way explains both its strength and its limits. SEBI’s thirty day observation window under regulation 25 is not an approval and the regulations never describe it as one. The instrument that carries the weight is the due diligence certificate from the lead managers, coupled with regulation 24, which makes them responsible for the adequacy of what the issuer has said. The twenty one day public hosting period is the second instrument: it converts an unlisted company’s document into something the public, and competitors, can pick apart, and the lead managers then have to report to SEBI what came back. Neither mechanism screens for a good price. Both screen for a complete and answerable document.
The most recent additions are aimed at the gap between the document and what a retail applicant actually reads. Requiring every qualitative claim in the abridged prospectus to be tied to a key performance indicator attacks the specific failure mode of a marketing document that says a company is a leader without saying in what and by what measure, and the April 1, 2025 industry standards replace issuer-defined indicators with a common set, so the definitions are fixed outside the offer document. The audiovisual requirement, with its equitable distribution across sections including risk factors and litigations, is a rule against selective emphasis, and its warning about finfluencers names the channel SEBI expects to be competing with.
What a careful applicant would still do is read for the parts the rules force into the open rather than the parts that are being promoted. The objects of the issue, with the caps on general corporate purposes, tell you how much of the raise has a stated destination. The basis of issue price section, cross-checked against the financial ratios that regulation 127 requires at both ends of the band, tells you what the band implies. The key performance indicators, now standardised, are comparable to those in the last few offer documents in the same industry, which is a comparison the standards exist to make possible. SEBI’s own investor education material sets a similar frame for research generally, pointing readers to the business model, competitors and financial statements for at least the past two years. The regulations guarantee that this material exists, is dated, and has someone’s name against it. They do not do the reading.
