SECP eases IPO requirements to facilitate access to capital markets

ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has made it easier for established businesses to raise capital through the Pakistan Stock Exchange (PSX).

According to a statement issued by the SECP, businesses operating as partnerships, Limited Liability Partnerships (LLPs), and carved-out business divisions can now use their historical profitability record to qualify for an Initial Public Offering (IPO).

The facilitation has been provided through amendments to the Public Offering Regulations, 2017. The reforms are aimed at reducing barriers to listing, promoting corporatisation, improving ease of doing business, and broadening access to capital markets.

Under the revised framework, eligible businesses can now rely on their historical profitable track record prior to incorporation as a company to satisfy the two-year profitability requirement for an IPO. This removes a major hurdle for established businesses seeking to access capital markets and raise growth capital.

The amendments are expected to encourage more businesses to enter the corporate sector, access financing through the stock market, and contribute to economic growth and job creation. However, to protect investor interests, the amended regulations introduce a number of safeguards.

Eligible businesses will be required to prepare revised financial statements for at least the preceding two financial years, duly audited by a Quality Control Review (QCR)-rated audit firm. They must also submit audited financial statements of the issuer for the period during which it has operated as a public limited company. 

In addition, the entire shareholding of sponsors will remain subject to a two-year post-listing lock-in requirement.