INTRODUCTION
Capital market does a very important function in any economy, that is distributing capital to most deserving enterprises. In journey of India towards Viksit Bharat ensuring that capital is distributed wisely is very vital aspect. Securities and Exchange Board of India [SEBI] has been taking path breaking steps in that direction. And in this journey SEBI has been relying on Company Secretaries as very important stakeholder.
There are following trends –
- Ease of raising funds
- Ease of compliance and disclosures
- Strengthening governance
- Curb wrong companies getting capital market access
- Tight enforcement
Ease of raising funds and discovery of market price
Over last four years [‘2021-22 till 2023-24’], SEBI could successfully reduce the time taken for listing in public issue from T+6 days to T+3 days, where ‘T’ denotes date of closures of the issue[1]. Trade settlement days brought down from T+2 to T+0 in phased manner[2]. As a result, total number of companies raising funds via Initial Public Offer [‘IPO’] increased from 55 in 2020-21 to 272 in 2023-24 in last four years[3] and total market capital of Indian listed companies raised from ₹ 29,365,732.90 as on March 2022 to ₹441,83,829.51 as on March 2025[4].
(Image 1: Number of IPOs and Funds Raised from year 2020-21 to 2023-24)
Total number of days for non-fast track rights issue got reduced from 317 days to 23 as a result total 40+ companies came out with rights issue and could raise ₹ 9303 crore in a span of 65 days. This is a record.
In last 7 years number of people penalised under Securities and Exchange Boad of India [Prohibition of Insider Trading] Regulation, 2015 [‘SEBI PIT’] has gone close to 500 out of that around 130+ have been debarred from capital market, levied penalty of ₹ 600 crore + and many CXOs had to compromise their position. These enforcement and changes in law has contributed for improvement in hygiene of secondary market transaction and overall improvement of healthy price discovery mechanism.
Collectively these initiatives contribute eliminating or minimising any undue interference in price discovery and thereby ensuring right distribution of capital to deserving companies. This clearly indicates that capital raise, capital distribution and capital deployment all of it has increased by multi times and it has resulted in wealth creation for 12.5 crore investors in India[5].
This clearly indicates that company secretaries contributing to IPO/ Rights Issue / Employee Stock Option Plan [‘ESOP’] will have great opportunity. Practising Company Secretaries [’PCS’] and company secretaries in employment both will have great area of specialisation in this. Transformation of company from unlisted to listed is a challenging step and therefor professionals helping companies to achieve this seamlessly will have great opportunity to contribute. And helping listed companies to have robust mechanisms to ensure adherence to SEBI PIT regulations is equal opportunity to contribute in this endeavour of SEBI.
Wrong Companies
Though we saw some instances like Gensol Engineering Ltd, overall number of such cases have seen decline in numbers. SEBI and stock exchanges have returned many offer documents in last few years to ensure basic hygiene about companies approaching capital market. One should not ignore these efforts which have contributed to overall capital market development and improvement in quality of companies planning for IPO.
In last few years we have also seen eligibility norms for Smal and Medium Enterprises Initial Public Offer [‘SME IPO’] undergoing major change and there by resulting in IPO size of SME IPO getting raised from ₹5 – ₹10 crore to more than ₹25 crore in recent times. On an average, companies making higher profits and more sustainability are approaching for SME IPO. Though this is perceived not the good news for smaller SMEs, it helps market reach equilibrium. Recently SEBI has done lot of changes in Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations 2015 [‘SEBI LODR’] to make many governance provisions appliable to even smaller companies. Though this may be perceived as higher compliance norms, it is important in overall scheme of things of building trust of retail investors in capital market.
Company Secretary both in employment or practice [‘CS’] has great opportunity for preparing companies to knock the door of capital market and unlock wealth. CS is a guide for corporates to prepare for IPO, and opportunity in preparing companies is equally valuable as helping companies to go for IPO. CS also shoulders a responsibility to warn promoter and protect them from going in wrong direction.
Strengthening Disclosure Requirements
In last 3 years 26 changes have happened in regulation 30 and schedule III of SEBI LODR. 11 consultation papers got released from SEBI in last three years to listen to ecosystem and market towards strengthening of disclosures under SEBI LODR. Industry Standards Forum [ISF’] released 3 to 4 documents to strengthen disclosure standards followed by Indian inc.
This disclosure requirements might have created information overload for some time, but over a period, probably, it will help to enhance maturity about understanding of company amongst investors and culture of compliance will get deeper, wider. This will be a game changer and also build trust amongst investors about corporates.
In last one-year overall ease towards disclosures has enhanced as a result of single window upload facility to companies [when it comes to disclosure of details on stock exchange is concerned]. Overall consolidation of disclosure timings and curating data about listed companies of regulators portal brings lot of ease both to corporates and investors. It is a role of CS to ensure that this ease is communicated well to the important stakeholders.
Disclosure is a compliance, but it is essentially the tool for investor to take informed decision and opportunity for corporate to get stakeholders alignment. Therefore, disclosure should not be considered as burden but a platform and an opportunity for getting investors alignment and also to distinguish itself with others in market.
Opportunities for CS and PCS
SEBI wide amendment dated December 12, 2024, to SEBI LODR has validated that compliance officer should be at one level below Board of Directors and thereby raising bar of company secretaries who are functioning as compliance officer in listed companies. Same amendment has also placed secretarial auditor at par with statutory auditors in many parameters. This will have far reaching implications and will strengthen the position of CS in corporate and PCS in overall landscape of governance in India. Now it is our responsibility to invest in self and occupy that position to serve best interest of nation.
Conclusion .
Overall, width and depth of capital market is growing. Many investors are betting on Indian capital market and Indian enterprises. Indian enterprises are also coming forward to take them to next orbit and unlock value. Role CS is unique in this value unlocking and good governance journey. Next 25 years are going to be crucial and game changer for this profession. Let’s try to optimise it and contribute fullest
[1] https://www.sebi.gov.in/legal/circulars/aug-2023/reduction-of-timeline-for-listing-of-shares-in-public-issue-from-existing-t-6-days-to-t-3-days_75122.html
[2] https://www.sebi.gov.in/media-and-notifications/press-releases/sep-2024/sebi-board-meeting_87154.html
[3] https://www.sebi.gov.in/sebiweb/home/HomeAction.do?doListing=yes&sid=4&ssid=80&smid=101
[4] https://www.bseindia.com/markets/equity/EQReports/allindiamktcap.aspx
[5] https://www.moneycontrol.com/news/business/markets/retail-power-retail-holdings-rise-more-than-10x-over-the-last-decade-12901840.html