The Securities and Exchange Board of India (Sebi) is set to review its merchant banking regulations and overhaul the framework governing public issues, with a focus on simplifying processes and reducing compliance and issuance costs. According to reports from Business Standard, Jeevan Sonparote, an executive director at Sebi, announced these developments while speaking at a conference by the Association of Investment Bankers of India (AIBI). The merchant banking regulations, introduced recently, are due for a review after the first six months of implementation, with a consultation paper expected soon. As reported by The Hindu BusinessLine, Sonparote stated there is a need to revisit this particular procedure, referring to the existing requirements, adding that the regulator wanted a thorough review of the procedures and processes under the ICDR framework. The review will examine whether the rules reflect the actual work done by merchant bankers and look at provisions relating to valuations.
Sebi is also preparing to review the Issue of Capital and Disclosure Requirements (ICDR) regulations, with a working group expected to be formed shortly. The move aims to streamline the primary market process, eliminate redundant compliance burdens and enhance regulatory clarity for intermediaries. As reported by Business Standard, the exercise would focus on removing redundant provisions, streamlining processes and providing greater clarity on the roles and responsibilities of merchant bankers. Sonparote stated there is a need to revisit this particular procedure, referring to the existing requirements, adding that the regulator wanted a thorough review of the procedures and processes under the ICDR framework. The ICDR review is expected to be undertaken over the next six months.
The regulator is also looking at strengthening the repository system for IPO-related documents so that it serves as a compliance handbook rather than merely a tick-box mechanism. According to Business Standard, Sebi plans to engage with merchant bankers, particularly those handling SME issues, through regular workshops to align expectations on compliance. The regulator intends to hold such interactions quarterly or every six months and discuss the regulatory perspective on offer documents. Sonparote emphasised on the need to strengthen the central repository system that was introduced by SEBI in December 2024, stating that the AIBI should take up this responsibility and ensure members utilise the repository system not only as a tick box but as a compliance handbook where all documents related to that particular IPO were filed.
SEBI is expressing particular focus on the small and medium enterprises (SME) IPO segment, where merchant bankers are expected to provide extended guidance to newly listed companies. As reported by Business Standard, Sonparote said SEBI was mulling revisiting regulations around the print and billboard ads of issuer companies, including lengthy newspaper ads and product billboards with QR codes where nothing is visible. The regulator expects merchant bankers to handhold SME issuers not just during the IPO process, but for at least two to three years post-listing to ensure seamless corporate governance and legal compliance. SEBI and AIBI are finalising a project to establish performance indicators for merchant bankers, which is expected to be rolled out within the next month.
Over the next three to six months, Sebi and industry bodies are expected to work on several such initiatives, including outreach programmes for SMEs and efforts to strengthen the role and performance framework for merchant bankers. As reported by The Hindu BusinessLine, SEBI and industry bodies are expected to work over the next three to six months on these measures. The review would seek to ensure that the regulations remain aligned with the business of merchant bankers, including a reassessment of provisions relating to valuations. In December last year, SEBI had mandated the IPO-bound companies issue a easy-to-understand abridged form of the draft red herring prospectus (DRHP), in addition to filing the abridged form of the RHP. The regulator also approved amendments to ICDR Regulations that enabled the locking in of pledged shares of promoters through a depository mechanism, to make listing of companies easier. In a consultation paper floated in June, SEBI had proposed a harmonised framework for determining the base price for pre-open call auctions and the price band mechanism for securities listed on multiple stock exchanges.
