Sebi mandates 10-minute audio-video disclosure for companies launching IPOs

Capital markets regulator Securities and Exchange Board of India has issued new regulations for companies launching an Initial Public Offer (IPO). In a recent circular, Sebi has said disclosures made in the draft red herring prospectus (DRHP), red herring prospectus (RHP) and price band advertisement for main-board public issues should be made in audio-visual (AV) format for ease of understanding of the investor.

The regulator said that the AV content must also contain the disclosure that asks investors to not rely on any other document, content or information provided in respect to the public issue on the internet/online websites/social media platforms/micro-blogging platforms by finfluencers.

The steps have been taken to make it easier for investors to understand the features of the public issue and the company.

Sebi said in a circular: "Based on comments received from various stakeholders, it has been decided that salient disclosures made in the Draft Red Herring Prospectus (DRHP), Red Herring Prospectus (RHP) and Price Band Advertisement for public issues shall also be made available in Audio Visual format (AV) for ease in understanding the features of public issues. Such AV shall be prepared and placed in the public domain for all main board public issues."

As per the guidelines, the AV will have to cover details on the business of the company, promoter, management, financial information, pending legal matters, risks, and other details which usually the draft red herring prospectus (DRHP) contains.

"The total duration of the AV shall be equitably distributed to cover material disclosures made under various sections of the DRHP and RHP viz. about the company, risk factors, capital structure, objects of the offer, business of the issuer, promoters, management, summary of financial information, litigations, material developments and terms of the offer etc," Sebi said, adding that the content must be factual, non-repetitive, non-promotional and shall not be misleading in any manner.

The video will be accessible on the issuer’s website, social media channels, and the Association of Investment Bankers of India (AIBI) website. Additionally, it can be found within the offer documents via a QR code. Investors are advised to rely solely on this information and disregard any other related content disseminated through social media platforms or financial influencers.

Initially, these videos will be made available in English and Hindi.

The guideline is voluntary for companies filing DRHPs from July 1 but is mandated for draft documents filed after October 1.