Tata Play IPO: First Tata Group Company To Hit The IPO Market Via The Confidential Pre-Filing Route

Tata Play (formerly known as Tata Sky) is the first business to pre-file for an initial public offering (IPO). The Securities and Exchange Board of India (Sebi) received the draught red herring prospectus (DRHP) from the direct-to-home platform on November 29, the Tata group company announced through a newspaper ad.

Only last month did the capital markets regulator change the Issue of the Capital and Disclosure Requirements, bringing to the domestic markets the notion of confidential filings, which is well-liked in the US markets.

An unlisted company is permitted to keep its offer document confidential under this optional technique until it solidifies its IPO strategy.

The offer document for Tata Play IPO won't be available to the general public; instead, it will only be available for review by the regulator and exchanges. Once Sebi gives its remarks and the firm decides to begin its IPO, the company will need to file an amended DRHP, which will be a public document.

Market sources claim that The Walt Disney Company-led company is considering an IPO of about Rs 3,000 crore, which may include both secondary and new share sales.

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"The purpose of this strategy was to provide corporations the ability to keep crucial business information under wraps until it was clear when the IPO would begin. From that angle, I do anticipate that many businesses, especially those in the new-age technology sector, will choose this path, according to Pranav Haldea, managing director of PRIME Database.

Global businesses including Snapchat, Robinhood, SurveyMonkey, and LINE have opted for secret filing in recent years.

According to investment bankers, the freedom of information flow is the main incentive for businesses to file confidentially. They argue that by withholding vital information from their rivals, it might be abused.

The main reason is that disclosures are kept private until Sebi approves them. The competitive positioning, group companies, and linked party disclosures are unknown to the general public. Because of this, it will be well-liked. When you submit, you frequently have no assurance that you will receive a response or even a value, according to Pranjal Srivastava, partner-ECM at Centrum Capital.

He predicted that newer businesses, as opposed to more established ones, would be more likely to follow this path.

Companies using the pre-filing route are now able to market their product to institutional investors in order to determine demand and set a fair price. To enable issuers to conduct limited purpose marketing to eligible institutional buyers, the so-called "test the water" (TTW) clause was created (QIBs).

No further information may be communicated with potential investors during the TTW exercise with QIBs outside of what is contained in the pre-filed DRHP.

Companies using the pre-filing method have another important relaxation: they can postpone converting their outstanding warrants until after Sebi publishes its observations. At the time of submitting its DRHP, a firm had to immediately convert all of its outstanding warrants into equity shares.

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