Introduction
As more Indian companies preparing for an Initial Public Offering (IPO) choose the confidential pre-filing route, curiosity around this approach is growing. The most obvious question is – if a company is going public, why keep its IPO filings confidential?
To answer this, we will explore the origins of confidential IPO filings, the need that led to their introduction, and how they have been implemented worldwide. Finally, we will examine how this framework is shaping the Indian primary market.
Origin of the Confidential Filing Route
The confidential filing of the IPO documents with the regulator was originated in United States in 2012 with the enactment of the Jumpstart Our Business Startups (JOBS) Act[1]. This legislation allowed Emerging Growth Companies (EGCs), defined as firms with less than $1 billion in revenue, to submit draft registration statements to the Securities and Exchange Commission (SEC) for non-public review[2]. Later this was taken up by UK, Canada, Hong Kong Etc.
Need of Confidential filing
In May 2022, the Securities and Exchange Board of India (SEBI) proposed the introduction of a pre-filing mechanism for IPOs in its consultation paper. [3] This was later approved in SEBI’s board meeting in November 2022[4]. Both documents highlighted the need for a confidential pre-filing route, emphasizing key reasons behind its introduction. The traditional IPO process presents challenges that necessitated an alternative approach like the confidential pre-filing route.
The reasons are as follows:
- Protecting Sensitive Business Information
When a company decides to go public, it must file a Draft Red Herring Prospectus (DRHP) that discloses sensitive business information ranging from financials and strategies to key risks and operational insights. In the traditional IPO route, this document enters the public domain well before the IPO plans are finalized. This prolonged public exposure can leave companies vulnerable to competitive exploitation, especially if the IPO is eventually shelved. Recognizing this concern, SEBI, in its November 2022 Board Meeting Note, revealed that between 2018 and 2021, out of 129 companies that filed offer documents, 57 ultimately did not proceed with their IPOs. This significant drop-off was one of the key reasons behind SEBI’s introduction of the confidential pre-filing route an alternative that balances regulatory scrutiny with strategic discretion.
- Managing Market Uncertainty
Even after SEBI’s approval, companies sometimes delay their IPOs due to market fluctuations. By the time they decide to relaunch, earlier investor feedback may no longer be relevant, making it harder to plan. The confidential IPO route allows companies to assess market conditions and move forward when the timing is right, ensuring a better chance of success.
- Allowing Flexibility in IPO Planning
Once a company files the Red Herring Prospectus (RHP), companies typically launch the IPO within 2-5 days, leaving little time to evaluate market conditions, investor sentiment, and regulatory feedback. The confidential pre-filing route offers greater flexibility, allowing companies to refine their plans and proceed at the right time.
The pre-filing route solves these issues by allowing companies to engage privately with SEBI and institutional investors before going public. This helps them time their IPOs better, protect sensitive information, and make well-informed decisions.
Process Adopted by SEBI for confidential pre-filing route:
Chapter IIA of SEBI (Issue of Capital and Disclosure Requirement) Regulations, 2018 (ICDR Regulations) govern the IPO by way of pre-filing of the offer document.
We will compare the traditional route of the IPO and Confidential Route to understand the process better (Table[5]):
| Activity | Existing Process | Pre-Filing Process |
| Filing of Offer Documents | Filing of DRHP with SEBI (document available in public domain). | Pre-filing of DRHP with SEBI (document not available in public domain). |
| Receipt of SEBI Observations | SEBI provides observations. | SEBI provides observations. |
| Updated Draft Red Herring Prospectus (UDRHP) | Filing of UDRHP with SEBI (mandatorily incorporating SEBI’s observations). | Issuer, if it so desires based on market conditions and its own financial requirements, may decide to pursue undertaking IPO. If so, then next step is filing of Updated Draft Red Herring Prospectus-I (UDRHP-I) with SEBI (incorporating SEBI’s observations). UDRHP-1 is available in public domain for public comment. |
| Public Feedback Incorporation | Not Applicable | Filing of Updated Draft Red Herring Prospectus-II (UDRHP-II) with SEBI (incorporating public comments), Document not available in public domain. |
| Final RHP Filing | Filing of RHP with RoC and SEBI. | Filing of RHP with RoC and SEBI. |
| Issue Process | IPO opens and closes. | IPO opens and closes. |
| Filing of Prospectus | Filing of Prospectus with SEBI. | Filing of Prospectus with SEBI. |
| Publicity & Marketing | Permitted from DRHP filing. Public communication before DRHP must align with past issuer practices. | Publicity and marketing not permitted from filing of the DRHP. Limited marketing permitted (Only for Testing the waters i.e., limited purpose marketing of the intended issue to only QIBs during the Prefiling stage). Public communication / marketing from date of board meeting in which the IPO is approved till filing of updated draft offer document (UDRHP-I) shall be consistent with past practices of issuers |
| Exemptions under ICDR after DRHP filing | N/A | (1) Restriction on issuing new shares/convertibles. (2) Flexibility in changes to Schedule XVI matters (e.g., directors, promoters, objects of the issue) without refiling. Till filing of UDRHP-1. |
| Offer For Sale (OFS) Compliance | Minimum one-year holding before issue requirement for equity shares in OFS. This is to be tested at the stage of filing of DRHP. | Compliance with additional conditions for OFS related to minimum period of one year of holding of equity shares proposed to be offered at OFS and compliance with conditions pertaining to securities which are ineligible to be counted towards minimum promoters’ contribution to be tested at the stage of UDRHP-I. |
| Validity of SEBI Observation | Issue must open within 12 months of SEBI observation. | Issue must open within 18 months of SEBI observation, subject to UDRHP-I filing within 16 months. |
| Applicability of Schedule XVI i.e. All change permissible under Schedule XVI such as change in issue size (fresh issue and/ or offer for sale), change in promoter/ directors, objects, without the requirement of re-filing | Applicable from DRHP filing. Fresh issue size can change up to 20% after SEBI’s observations. | Applicable from the date of issuance of SEBI Observations on pre-filed document. Change (increase or decrease) in fresh issue size after issuance of SEBI’s observation proposed to be permitted to the extent of 50% as against 20% in existing mechanism. |
Why Companies may Consider the Confidential Pre-Filing Route for IPOs
Going public is a major milestone, but the traditional IPO process comes with challenges such as tight timelines, market volatility, and the risk of exposing sensitive business information too soon. The confidential pre-filing route gives companies more control over their IPO journey. Here’s why companies may consider it:
1. Pick the Right Market Timing
In the traditional IPO process, once a company gets SEBI’s approval, it has just 12 months to launch the IPO. If market conditions turn unfavourable, companies are stuck with a tough choice of going ahead anyway or scrap the plan.
With confidential pre-filing, companies get 18 months instead of 12, giving them extra breathing room. They can wait for the right market conditions and investor sentiment before going public.
2. Review and Improve Without Public Scrutiny
The confidential pre-filing route lets companies share their draft offer documents privately with SEBI, away from competitors and market speculators. This gives them the space to fine-tune disclosures, address regulatory feedback, and plan their IPO confidently, without the pressure of public exposure or giving away sensitive business plans too early.
3. More Flexibility in IPO Structure
Markets change, and so do business needs. The confidential route offers:
Up to 50% change in fresh issue size after SEBI’s observations (vs. only 20% in the traditional route)[6]. Freedom to make key business changes (like appointing new directors or modifying the use of IPO proceeds) without refiling the offer document.
This makes IPO planning much more adaptable.
4. Test Investor Interest Without Commitments
Before committing to a full IPO, companies can privately gauge investor interest through Qualified Institutional Buyers (QIBs). This “Testing the Waters”[7] approach helps them understand demand and pricing, without the pressure of public scrutiny.
As more companies explore this route, it could reshape how IPOs are planned in India. By balancing transparency with strategic flexibility, the confidential pre-filing option helps businesses go public on their own terms. For companies aiming for a smooth listing with minimal disruptions, this could be the future of IPOs.
Companies that opted the confidential pre-filing route for IPO:
Tata Capital limited, Swiggy limited, Vishal Mega Mart Limited, Physics Wallah Limited, Tata Play Limited, Oravel Stays Limited (OYO)
Conclusion
The confidential pre-filing route offers companies a strategic advantage in the IPO process by allowing them to engage with SEBI and institutional investors without immediately making their plans public. This reduces competitive risks, provides flexibility in timing, and ensures a more efficient IPO execution. As Indian markets evolve, this approach is likely to gain traction, enabling companies to go public with greater confidence and control. Ultimately, it strikes a balance between regulatory compliance and business strategy, making IPOs more adaptable to market conditions.
[1] https://mywallst.com/blog/what-does-a-confidential-ipo-filing-mean/
[2] https://www.treasuryandrisk.com/2017/06/30/sec-opens-confidential-ipo-filing-to-all-companies/?slreturn=2025032525721
[3] https://www.sebi.gov.in/reports-and-statistics/reports/may-2022/consultation-paper-on-pre-filing-of-offer-document-in-case-of-initial-public-offerings_58875.html
[4] https://www.sebi.gov.in/sebi_data/meetingfiles/nov-2022/1667447898345_1.pdf
[5] https://www.sebi.gov.in/sebi_data/meetingfiles/nov-2022/1667447898345_1.pdf
[6] https://www.sebi.gov.in/sebi_data/meetingfiles/nov-2022/1667447898345_1.pdf
[7] https://www.sebi.gov.in/sebi_data/meetingfiles/nov-2022/1667447898345_1.pdf
The article is written by Mr. Animesh Joshi and Published on Taxmann. The link is: