Going Public In Silence: Decoding SEBI’s Confidential IPO Route

How SEBI’s pre-filing mechanism under Chapter IIA of the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 (ICDR Regulations) reshapes the IPO process – what it gives issuers and where India stands.

Introduction: IPOs and Confidential IPOs

In November 2024, Swiggy went public and raised over Rs 11,300 crore. What the market did not know until September 2024, barely six weeks before the subscription opened, was that Swiggy had already spent five months in regulatory review. The company had filed its draft offer document with SEBI in April 2024, received observations, and refined it through two updated versions, all without a single word entering the public domain. No competitor read it. No analyst dissected it. It was India's confidential Initial Public Offering (IPO) route, successfully listed for the first time.

The conventional route for an IPO in India is governed by Chapter II of the SEBI ICDR Regulations, which requires the issuer to file a Draft Red Herring Prospectus (DRHP) with SEBI and the stock exchanges, after which the document becomes immediately available to the public for a minimum of 21 days. Chapter IIA of the ICDR Regulations, inserted by the SEBI ICDR (Fourth Amendment) Regulations, 2022 vide Circular No. SEBI/LAD-NRO/GN/2022/107, effective from November 21, 2022, provides an alternative to the company. Under this route, an issuer may file its DRHP with SEBI on a confidential basis. SEBI reviews it privately and issues observations. The issuer then decides, based on market conditions and its own requirements, whether to proceed. If it proceeds, an Updated Draft Red Herring Prospectus (UDRHP-I) is placed in the public domain for a minimum of 21 days for public comment before the offering opens. If it does not, the filing is withdrawn without any substantive document left in the public record.

This article examines how the confidential pre-filing mechanism came into existence in India, what Chapter IIA provides at the regulation level, how it compares with Chapter II across every material dimension, and what three years of market adoption reveal.

Background and History: The Problem That Needed Solving

 Why the Traditional Route Fell Short

 India’s pre-2022 IPO regime had a structural tension at its core. The moment a company filed its DRHP, a document running hundreds of pages containing granular disclosures on business strategy, key risks, unit economics, related-party transactions, and management background, that information became public. The regulatory rationale was sound: early disclosure gives the market time to scrutinize the issuer before subscription opens. But the cost fell on issuers in competitive or information-sensitive industries. A company exploring an IPO during a volatile quarter was forced to disclose sensitive data, the moment it had the least certainty about whether it would actually list.

SEBI’s November 2022 Board Meeting paper illustrated the problem precisely. Between FY 2018-19 and FY 2020-21, 129 companies filed DRHPs with SEBI. Of these, 57 companies (nearly 44 percent) did not proceed with their IPO plans. Nearly half of all filing companies had disclosed sensitive information to the public without any resulting capital raise. By the time they returned to market, investor feedback from earlier roadshows had gone stale, while competitors had received a detailed briefing covering customer concentration, unit economics, key contracts, litigation exposure, and management compensation.

International Influences: What India Borrowed and What India Changed

Confidential pre-filing was not India’s invention. The United States addressed a comparable problem in 2012 through the Jumpstart Our Business Startups (JOBS) Act. Section 6(e) of the US Securities Act permitted Emerging Growth Companies (EGCs) to submit Draft Registration Statements (DRS) to the Securities and Exchange Commission (SEC) for non-public review before any public filing. This allowed EGCs to receive multiple rounds of SEC comments and responses privately. The issuer refined the filing and, when ready to proceed, disclosed the document publicly. The JOBS Act also introduced the concept of testing the waters (TTW), which allowed EGCs to conduct preliminary conversations with qualified institutional buyers (QIBs) and accredited investors before filing, to gauge investor interest without any public disclosure. In July 2017, the SEC extended the accommodation to all companies regardless of size, cementing confidential filing as a mainstream US practice. As of the mid-2020s, over 90 per cent of US technology IPOs used some form of the confidential route. Canadian framework permits TTW interactions with QIB during the confidential review period and requires a mandatory 15-day cooling-off period between the last TTW interaction and the public filing of the offer document.

India’s borrowing was selective and deliberate. SEBI adopted the core concept but built its own architecture around it. Like the US and Canada, India permits QIB interaction during the confidential review stage. Like Canada, SEBI mandates a 7 working day cooling-off period between the last QIB interaction and the UDRHP-I filing. Unlike the US, any Main Board issuer is eligible and QIB interaction is strictly limited to information disclosed in the Pre-Filed DRHP; valuations and price ranges cannot be shared. India also introduced two features that the US model does not require: a public announcement confirming the filing within 2 working days, and a mandatory 21-day public comment period on the UDRHP-I before the Red Herring Prospectus (RHP) stage. The net result is a mechanism that is more regulator-driven and more disclosure-oriented than the US model, while preserving the pre-filing flexibility that the issuers need.

Adoption in India: From Chapter II to Chapter IIA

Before November 2022, all Mainboard IPOs in India were governed exclusively by Chapter II of the ICDR Regulations. Under that framework, the DRHP was filed publicly on the day it was submitted to SEBI. The eligibility structure was calibrated for certainty at the filing date: the one-year holding period for selling shareholders in an Offer for Sale (OFS) was measured from the DRHP filing; securities ineligible for minimum promoters’ contribution were identified at the same stage; all outstanding convertible securities had to be resolved before filing. SEBI issue its observations within 30 days of the later of receipt of the DRHP, in-principle approval from the stock exchanges, or satisfactory clarifications from the lead managers. Once in-principle approval was issued, the issuer had 12 months to open the IPO.

The 12-month validity period worked when market conditions remained supportive. It became restrictive when market sentiment weakened or macro conditions turned adverse. The limitation was structural: the clock ran from SEBI’s approval, not from the issuer’s readiness to launch.

An issuer that received SEBI observations during a favourable market window but face adverse market sentiment months later due to market corrections, sector-specific valuation compression, macroeconomic uncertainty, or geopolitical uncertainty. If market conditions did not improve before the 12-month validity expired, the approval letter lapsed regardless of whether the issuer remained fundamentally ready to go public. In practical terms, this meant the issuer had to refile the DRHP, effectively restarting the process with a fresh round of regulatory review, updated disclosures, renewed public scrutiny, additional execution costs and, in some cases, a reassessment of the issue size or overall IPO structure.

SEBI’s Consultation and Board Rationale

In May 2022, SEBI on recommendation of Primary Market Advisory Committee (PMAC) published a consultation paper proposing a pre-filing mechanism for Main Board IPOs. SEBI identified three principal objectives: (i) reducing competitive harm from public disclosure in cases of subsequent withdrawal (ii) giving issuers flexibility in timing the offering against market conditions and (iii) permitting QIB interaction during the regulatory review phase without full public exposure of the traditional route. Chapter IIA was introduced as an optional mechanism running alongside Chapter II. Any issuer planning a Mainboard IPO could elect the confidential route or stick with the traditional process.

Chapter II versus Chapter IIA:

The two routes lead to the same outcome: a company listed on BSE or NSE. They diverge significantly in timing, disclosure, and the flexibility they extend to issuers. The most visible difference between Chapter II and Chapter IIA is whether the initial offer document is available to the public.

The comparison table below captures the key dimensions.

The structural differences between the two chapters explain why Chapter IIA was designed as an opt-in and not a replacement. For companies with straightforward capital structures, stable ownership, and limited competitive sensitivity in their disclosures, Chapter II remains faster and operationally simpler. Chapter IIA’s value is specific: it serves issuers who need confidentiality during regulatory review, flexibility to adjust capital structure after observations, and more time to identify the right market window. Those three requirements tend to cluster in high-growth, institutionally backed companies operating in competitive industries.

SEBI’s observations on an offer document carry a validity period. The issuer must open the IPO within that period, failing which the observations lapse, and the document must be refiled. Under Chapter IIA, the additional six months matters most when market windows close for reasons outside the issuer’s control. Geopolitical conflict, sharp rate movements, or a global equity sell-off can shut the IPO market for months at a stretch. A Chapter II issuer caught in such a window has limited flexibility to wait for conditions to improve. A Chapter IIA issuer in the same position has materially more runway to identify the right launch window. The additional time is not unconditional. UDRHP-I must still be filed within 16 months of SEBI’s observations, ensuring that the public sees an updated offer document at least two months before the 18-month validity expires. The longer runway therefore comes with a built-in regulatory compliance.

Issuer Advantages and Investor Protection Concerns

Issuer and Market Advantages

For an issuer, the biggest advantage of Chapter IIA is the freedom to explore a listing without committing to a public story too early.

A DRHP filed publicly under Chapter II is immediately read and scrutinized by analysts, competitors and media. Any regulatory comment that requires a refile, any financial restatement, or any change in promoter structure becomes visible the moment it happens. Chapter IIA removes that pressure. The issuer and its bankers can work through SEBI's observations privately and present a clean UDRHP-I when it is ready, and time the listing to match market momentum rather than a calendar quarter.

The TTW mechanism introduces a second-order benefit: better price discovery before public commitment. When a company conducts QIB interactions during the confidential stage, it receives unfiltered institutional feedback on the deal structure, valuation framework, and key performance indicators (KPIs) before any of those elements are locked into a public document. This feedback loop allows the issuer and bankers to stress-test their KPI disclosures and recalibrate the issue size and Offer for Sale (OFS) mixed within the 50 per cent flexibility window. This results in a more market-appropriate transaction structure by the time the UDRHP-I reaches retail investors.

The 12-month period under Chapter II can be exhausted in one cycle of unfavourable market conditions. The 18-month window under Chapter IIA covers at least two full market quarters and two earning’s reporting periods. An issuer that receives SEBI observations and then encounters a period of market disruption, whether driven by global equity sell-offs, domestic macro events, or sector-specific headwinds has materially more time to wait for conditions to stabilize before the window expires.

The Investor Protection Concern

The advantages above carry a mirror-image risk for investors. The most common concern is the compression of retail investors due diligence time. Under the traditional route, a DRHP may be in the public domain for six to twelve months before the RHP is filed, giving analysts, SEBI, the media, and retail investors sufficient time to scrutinize financials, governance, and risk factors. Under Chapter IIA, the UDRHP-I must be in public for at least 21 days before the RHP, but in practice, the window between UDRHP-I and issue opening can be as short as three to four weeks. Retail investors, many of whom rely on secondary analyst commentary rather than reading primary documents, may have materially less time to assess the position before the subscription window opens.

Second, the QIB interaction permitted before SEBI observations creates a structural information asymmetry. Institutional investors who interact with the issuer during the pre-filing stage receive management presentations and financial details before the UDRHP-I is public. By the time the retail investor accesses the document, QIBs have already formed preliminary investment views, discussed pricing ranges, and assessed management responses to critical questions. The retail investor has 21 days. The QIB may have had three to five months.

The public announcement requirement is an imperfect mitigant. The newspaper notice confirms that a filing has been made, ensuring the fact of the IPO exploration is not entirely concealed. But the notice carries no substantive information, neither offer size nor financial summary. The market learns that a company is exploring a public offer. That significantly indicates less information than a DRHP, and it creates no meaningful analytical basis for retail investor preparation.

Market Experience & Trend Analysis

A Slow Start, a Turning Point, and a Surge

Chapter IIA had a slow start. From November 2022 to January 2025, only a few companies have filed under the route. A new mechanism with an additional document stage and an unfamiliar compliance sequence required issuers and their advisors to develop familiarity before the adoption accelerates.

Tata Play (formerly Tata Sky), the satellite television subsidiary of the Tata Group, was the first issuer to file under Chapter IIA in December 2022 and received SEBI’s observation letter in April 2023 but did not proceed with IPO. No offer document entered the public domain. No withdrawal was publicly visible. The pre-filing route did exactly what it was designed to do: let an issuer engage with the regulator privately, assess its options, and step back without leaving a public record behind.

The 2025 Acceleration

As per prime database, from November 2022 to the end of 2024, only few companies used the route. In 2025, that changed. 29 companies out of approximately 260 total IPO filings opted for the confidential route, representing approximately 11 percent by count and Rs 87,256 crore by value, roughly 22 percent of the total IPO pipeline. In the first five months of 2026, 15 out of 66 filings used the confidential route, approximately 23 percent by count. Media estimates as of June 2026 put the year-to-date tally at approximately 24 confidential filings. The value share has consistently outpaced the count share across all tracked period, which indicates that larger, more complex transactions are gravitating toward Chapter IIA at a faster rate than smaller ones.

Conclusion:

Chapter IIA has settled into India’s IPO practice as a useful pre-filing route. The adoption trend discussed above shows that issuers are using it where confidentiality, timing and offer-structure flexibility matters. Its real value lies in giving companies a controlled path towards listing. Issuers can undergo SEBI review, assess institutional feedback within the permitted framework, refine the offer document and enter the public domain when the transaction is closer to its execution. This reduces premature disclosure risk and improves IPO preparedness.

The route has clear relevance especially for technology companies, consumer businesses, financial services entities and PE-backed issuers. These companies often deal with sensitive business metrics, large OFS components, restructuring steps or changing market windows. This route gives them more room to manage these issues before public scrutiny begins. The market experience so far supports the framework. The public disclosure framework remains intact through the UDRHP-I, public comment process and RHP filing. As more sizeable IPOs use this route, periodic SEBI data on confidential filings, withdrawals and completed listings would further improve market confidence. Chapter IIA provides issuers with better timing control, protects commercially sensitive information during review and keeps public disclosure before investment decisions are made.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.