In today’s Finshots, we tell you why more and more Indian companies are taking the confidential pre-filing IPO route before hitting the bourses.

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The Story

Let’s say it’s your 25th birthday next month, and you’re also expecting a fat Diwali bonus. You’re excited and tell everyone you know that you’re throwing a grand birthday dinner. You start planning early — the menu, the decor, the guest list, everything!

But then Diwali comes and goes… and that big bonus your company gave you hopes of, never shows up. Suddenly, your party plans don’t quite fit the budget. You scale things down, cancel a few invites, and make do with a smaller celebration. The next day, there’s chaos. Friends whisper about how they were “supposed” to be invited to this grand bash that never really happened for them at least. Basically, not quite the birthday you imagined.

Now let’s flip the story. This time, you keep your plans to yourself and wait until the bonus actually clinks in your account. When it does, you set a budget, finalise the guest list, send out invites, and host the perfect evening. The party goes smoothly, everyone has a blast, and months later, people are still talking about it.

Now, I don’t need to ask which version you’d prefer. It’s undoubtedly the second one.

And honestly, that’s exactly how, many companies eyeing a future stock market listing are thinking these days.

For context, a few days ago, Infra.Market, a marketplace for construction materials, quietly filed its DRHP (Draft Red Herring Prospectus) with SEBI via the confidential, or what’s called, the “pre-filing” route. Now, when a unicorn like Infra.Market, valued at a whopping $2.8 billion (₹24,850 crores), makes such a move, you’d expect the markets and media to be buzzing. But all that happened with Infra.Market were a few newspaper announcements, each carrying a disclaimer that “the pre-filing of the offer document shall not necessarily mean that the issuer will undertake the initial public offering”.

And this isn’t an isolated case. Even Tata Capital’s IPO, whose subscription closes today, began with a confidential DRHP filing. In fact, ever since SEBI introduced this route in November 2022, 22 companies have filed their DRHPs quietly — 18 of them in 2025 alone.

So it naturally makes you wonder, “Why are so many Indian companies choosing the hush-hush route before stepping into the spotlight?”

Well, the opening example probably gave you a big clue.

Companies prefer to keep their plans, and their numbers, under wraps until they’re absolutely sure about going public. Because if, after all that effort, they decide to hold off on the IPO, it can trigger a storm of speculation. The media starts talking, investors begin doubting, and the company’s reputation takes a hit. It’s something that could haunt it the next time it tries to raise funds.

But that’s not the only reason. See, when a company files for an IPO the traditional way, its DRHP document becomes public for at least 21 days initially. Investors can comment, the media picks it up, and SEBI and the stock exchanges begin their review. Once they’re satisfied, the SEBI issues an observation letter, and the company gets 12 months to launch the IPO, after updating the DRHP with any changes, of course, and publishing what’s called the RHP (the final document before an IPO).

Now here’s the catch. The entire DRHP, packed with business details, stays in the public domain through all of this. And that’s exactly what many firms want to avoid.

Take Swiggy, for instance. It chose the confidential route for a reason. If it had gone the traditional way, rivals could’ve easily accessed crucial data. Especially from Instamart, its quick commerce arm, like numbers, pricing strategies, customer insights, and even valuation details. That’s like handing competitors a cheat sheet before the game begins. And no company wants to leak that kind of information before it’s sure about going public.

Because one of the trickiest parts of the DRHP process is handling revisions when SEBI or stock exchanges ask for clarifications. Sure, it’s a normal part of the procedure, but things can get messy when the media turns every back-and-forth into a headline.

The WeWork India IPO, which just closed its subscription, is one of the best examples. While the IPO was fully subscribed, retail investors have raised concerns about alleged irregularities in the DRHP and questioned SEBI’s inaction. That’s not a good look, especially when the IPO is live, since it can impact subscription, valuations and how investors react once shares are allotted.

Now contrast all of this with the confidential route and you see the big advantage that often gets overlooked. Founders here retain control over every stage. Unlike the traditional path, the confidential DRHP stays under wraps until SEBI issues its observation letter, with only limited visibility among qualified institutional buyers (QIBs). That’s a fancy term for sophisticated investors like mutual funds, banks, and insurance companies. And once SEBI offers its observations, the company has up to 18 months to launch the IPO or withdraw, as long as it files an updated DRHP within 16 months.

That’s more time than the traditional route. And this gives companies the flexibility to pause if market conditions aren’t ideal — whether it’s geopolitical tensions, trade wars, or a market bloodbath; without having to justify it publicly. Founders can gauge the market quietly and decide what timing’s the best.

But there’s a small caveat here too, something analysts were worried about when the US opened up the confidential IPO route for companies intending to go public.

See, the US introduced this route in 2012 to help smaller companies and startups with less than $1 billion in annual revenue go public without the fear of public scrutiny. By 2017, its market regulator, the SEC (Securities and Exchange Commission), extended the option to all companies looking to list. And since then, 86% of US companies have used the confidential route to begin their IPO process.

But the thing is that besides the company’s executives, outside lawyers and bankers also get involved. That means the government or regulator’s employees may know inside details about pending offerings before investors do. And while it’s not easy to profit from this information, history shows that leaks and trading on insider knowledge aren’t unheard of. SEC employees themselves have been charged with trading stocks of companies under investigation, using unpublished, price-sensitive information to profit depending on whether the outcome of the investigation was positive or negative.

So yeah, if such information slips out during an IPO’s pre-filing, it’s not all that different from regular public scrutiny.

But honestly, that’s a minor hiccup in the bigger picture.

What really matters is how this gives companies the confidence to go public on their own terms, helping them raise funds and strengthen India’s capital markets.

Until next time…

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