IPO ads can be innovative, but risk disclosures must: SEBI

In their advertisements to attract investors to public offers, companies can be more creative and innovative as long as they are not misleading and contain necessary disclosures of associated risks and other facts, Sebi chief U K Sinha feels. 

Primary market has been mostly sluggish for last few years as companies have been finding it unattractive to enter capital market to raise funds through sale of shares, although Sebi has taken a number of steps to revive this segment. 

Asked whether Sebi would allow the companies to be innovative to make their public offer advertisements more attractive, while disclosing key risk factors, the Sebi chairman said "that is mainly for the companies to decide". 

The public offer advertisements, which are aimed to hard-sell the IPOs and FPOs among potential investors, typically follow similar formats containing numerous details without any usual creativity associated with other ads. 

"Our role is that we want the advertisements should not be misleading and the risk factors and substantial facts are not suppressed," Sinha told PTI in an interview. 

"The disclosure about risk factors and substantial facts are mandatory requirements and we cannot compromise on that. 

"But, within this framework, if the companies want to be innovative, they can certainly do it and they are most welcome to do that. We have not stopped them from being creative or innovative, but certain things have to be provided," he said. 

Sebi has been taking a number of steps to boost the primary market and its board yesterday also approved certain measures to make funding-raising process easier. 

The board approved making the IPO grading mechanism by credit rating agencies voluntary, while companies have been allowed to file shelf prospectus with one-year validity for multiple issuance of debt securities. 

Still, the IPO market has been sluggish for almost three years and IPO proposals worth Rs 72,000 crore are yet to hit the market despite having got regulatory clearance. The last major IPO was from state-run Coal IndiaBSE -0.05 % in 2010. 

Among various reforms, Sebi has introduced an e-IPO mechanism through which investments can be done online without signing any physical documents. This has helped fast-track the public offer processing time.