A close reading of SEBI’s confidential pre-filing framework under Chapter IIA of the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 (ICDR Regulations), the choices it gives issuers, and the way India’s IPO practice is responding.  

Introduction: IPOs and Confidential IPOs

In November 2024, Swiggy made its public-market debut and raised more than Rs 11,300 crore. But the real story had begun much earlier, away from market glare. Until September 2024, barely six weeks before the issue opened for subscription, investors had no visibility that Swiggy had already spent nearly five months under SEBI review. Swiggy had filed its draft offer document with SEBI in April 2024, received observations, and moved through two updated versions, all outside public view. Competitors could not mine the filing for business strategy. Analysts could not pull apart its unit economics, risk factors, or related-party disclosures. The media could not build the narrative before the company was ready. That quiet regulatory process ended in India’s first successful listing through the confidential Initial Public Offering (IPO) route, a route designed to let issuers progress through SEBI review without prematurely placing the full offer document in the public domain.

Under the conventional Indian IPO route, Chapter II of the SEBI ICDR Regulations requires an issuer to file a Draft Red Herring Prospectus (DRHP) with SEBI and the stock exchanges. Once filed, the DRHP becomes public immediately and remains available for public comment for at least 21 days. Chapter IIA of the ICDR Regulations, introduced through the SEBI ICDR (Fourth Amendment) Regulations, 2022 vide Circular No. SEBI/LAD-NRO/GN/2022/107 and effective from November 21, 2022, gives issuers another route. The issuer may submit its DRHP to SEBI confidentially. SEBI then reviews the document in private and issues its observations. The issuer can decide, looking at market conditions and its own commercial requirements, whether to move forward. If it does, an Updated Draft Red Herring Prospectus (UDRHP-I) is released publicly for at least 21 days for public comments before the offer opens. If it decides not to proceed, the filing can be withdrawn without any substantive offer document staying in the public record.

This analysis traces the entry of confidential pre-filing mechanism into India’s IPO framework, examines the regulatory framework of Chapter IIA, compares it with the traditional Chapter II route on each material parameter, and what the first three years of market adoption reveal.

Background and History: The Problem That Needed Solving

Why the Traditional Route Fell Short

Before 2022, India’s IPO framework carried a built-in commercial tension. The moment a company filed its DRHP, the document became public. And a DRHP is not a light-touch disclosure. It often runs into hundreds of pages, setting out business strategy, risk factors, unit economics, related-party transactions, management background, litigation exposure and other commercially sensitive details. The regulatory rationale was clear. Early public disclosure gave investors, analysts and the market enough time to examine the issuer before the subscription window opened. But the commercial burden sat squarely on issuers, particularly those in competitive or information-sensitive sectors. A company merely testing the IPO market during a volatile quarter had to place sensitive business information in the public domain at the very stage when it had the least certainty that the listing would actually proceed.

SEBI’s November 2022 Board Meeting paper put numbers to this problem. Between FY 2018-19 and FY 2020-21, 129 companies filed DRHPs with SEBI. Out of these, 57 companies, nearly 44 percent, abandoned their IPO plans. In practical terms, almost half the issuers that entered the public filing process disclosed sensitive business and financial information without raising capital. 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 Adopted and What India Changed

Confidential pre-filing did not begin in India. The United States had already addressed a similar concern 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 gave EGCs room to go through multiple rounds of SEC comments and responses privately, revise the filing, and release the document only when they were ready to proceed. The JOBS Act also introduced the testing the waters (TTW) framework, permitting EGCs to hold preliminary discussions with qualified institutional buyers (QIBs) and accredited investors before filing, to assess investor interest without public disclosure. In July 2017, the SEC extended this accommodation to all companies, regardless of size, making confidential filing a regular part of US IPO practice. By the mid-2020s, more than 90 per cent of US technology IPOs were using some form of the confidential route. Canada adopted a comparable model, permitting TTW interactions with QIBs during the confidential review period, subject to 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.