ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has revamped initial public offering (IPO) regime to make the IPO process simple, cost-effective and more efficient.

The amendments to IPO Regulations 2017 have been made after thorough consultation with market participants with an objective to promote capital formation by facilitating issuers and safeguarding the interest of general public by enhancing disclosures.

Under the new regulations, the eligibility criteria for listing of companies have been simplified to promote capital formation through securities market. Moreover, the issuers that have a track-record of less than three years and were not making profit from last two years are allowed to raise capital from the securities market.

However, such issuers are required to submit a business plan and provide enhanced risk disclosures in the offering document for prospective investors.

The amendments have been made with the target to provide ease and reducing cost of IPOs, the requirement of submitting audited accounts has been reduced from 5 to 2 years.

Besides the time-frame relating to submission of progress report by the issuer has been increased from quarterly to half yearly basis.

A senior official of the SECP said that to safeguard the interest of the general public, certain parameters for greenfield projects (GFPs) have been introduced such as to ensure at least 51 per cent equity contribution by the sponsors.

The successful business track record of the sponsors has been made mandatory and a criterion has been devised in this regard, experience and skills of the management to run GFP has been streamlined, mandatory financial close and risk-based disclosure in the offering document etc has been introduced.

The new regulation also contains an exit offer mechanism to protect the investors in case of change in the principal purpose of the issue.

For encouraging foreign investment, the book runner has been allowed to waive the margin requirement of the institutional investors including foreign investors, while the related parties have been allowed to perform different roles in the same IPO transaction.

The SECP maintains that the new IPO regime is a shift towards disclosure-based regime, which pertains to principal purpose of the issue, risk factors, share capital, financial information, management of the issuer, legal proceedings and overdue loans are made part of the prospectus.

Published in Dawn, January 2nd, 2020