Why Physicswallah, Vishal Mega mart, Swiggy chose confidential filing of IPO documents

The market regulator enabled confidential filing of IPO mechanism in December 2022
| Photo Credit:
lakshmiprasad S

PhysicsWallah, an online education platform, has chosen a confidential pre-filing approach for its initial public offering. Tata Capital, the financial services division of Tata Group, is said to be preparing to submit a draft red herring prospectus for its IPO through a confidential route. Earlier, companies like Tata Play, Vishal Mega Mart and Swiggy have utilised this filing method. Let’s take a closer look at this mode of filing. 

What is a confidential filing?

Confidential IPO is an optional route to file for an IPO confidentially. The market regulator enabled this mechanism in December 2022. Under this route, a company files for a draft document but it is not made public until the company decides to go live with its offering. The pre-filing of confidential IPO papers allows the company to engage with the regulator and address any regulatory concerns before the information is made public. Such filings are allowed in markets such as the UK and US. 

Does it make sense to opt for confidential filing now? 

Market observers believe that this may be a good time to opt for such filings given the increased market volatility in recent times amid the global tariff war and the uncertainty around IPO launches. The last few weeks have not seen a single company tap the market for an IPO, hinting at a slowdown. Several issuers may also have to rework and re-file draft offer documents for their IPOs given the drop in valuation of their listed peers. 

What are the advantages of a confidential filing? 

Confidential filings can work well for new age companies where investor feedback is important for deciding on the valuations. These companies may also not want to disclose their financials and business model too early to the public. Such filings could be especially useful in protecting sensitive information related to targeted acquisitions and litigation from the public until there is visibility regarding the launch of the IPO.  

This route is also  useful for traditional companies, if the IPO is delayed due to litigations or other business considerations. Sensitive information in the IPO can be kept away from the public until the actual public offer.

Once you get the initial SEBI observations, you can wait for a much longer period until you are ready to hit the market, which is very helpful in a volatile market. In regular filing, the approval remains valid for 12 months after SEBI gives it final observations. In confidential filing, this is valid for 18 months from the date of SEBI observations on the confidential draft prospectus.

What are the disadvantages? 

This route is a little more time consuming, so most traditional companies would be happy to go with the regular filing.  Confidential filing adds about 45 days to the IPO process. After the public draft prospectus is filed, the company has to wait for 21 days for public comments and then refile the offer document with SEBI. This could mean the company may have to go through an extra audit as financials are only valid for a certain period of time. This can result in additional time and cost, especially for smaller companies.

What are some of the other features?

Companies have to make a public announcement in three newspapers within two days of pre-filing without providing details related to the issue. The regulator will recommend changes or issue observations within thirty days of pre-filing or reply on clarification sought from lead managers/regulator/agency or completion of interaction with QIBs or date of intimation to the regulator about the conversion of outstanding convertible securities. 

Published on April 16, 2025