The Bombay Stock Exchange (BSE) is stepping up its efforts to ensure stricter scrutiny of IPOs, especially in the SME (Small and Medium Enterprises) segment. As concerns around the credibility and transparency of SME IPOs continue to surface, BSE is now turning to advanced technologies like Artificial Intelligence (AI) to address these challenges.
As part of a pilot project, BSE has begun deploying AI to scrutinize IPO applications more thoroughly. The rationale behind this move is clear — manual evaluation processes often miss critical inconsistencies or red flags in IPO filings. With AI in the picture, such loopholes can be efficiently identified, ensuring greater reliability in the IPO approval process.
One of the key focus areas for the AI system is to detect irregularities in financial documentation and company behavior. For example, AI can flag frequent changes in Chartered Accountants' (CAs) names, sudden and unexplained spikes in order books, or anomalies in related party transactions — all of which can indicate potential issues in a company’s financial health or integrity.
AI’s evaluation goes deep into the Draft Red Herring Prospectus (DRHP), taking only 20 to 40 minutes to complete the scrutiny process. This is a significant improvement over the manual evaluation timeline. If an application is genuine and all documents are in order, approvals and funding could be achieved in as little as 45 days.
Moreover, AI can also generate detailed reports under BSE and SEBI regulations, listing discrepancies or additional information required for compliance. This not only speeds up the IPO process but also ensures a higher level of scrutiny.
The initiative is currently in the pilot stage, but BSE is optimistic about expanding its scope. With AI in place, fraudulent activities that might go unnoticed in manual inspections will now be under a digital microscope.
This step marks a significant move towards transparency, efficiency, and trust in India’s SME IPO ecosystem. By leveraging AI, BSE aims to restore confidence among investors and ensure that only credible companies make it to the public market.
Disclaimer:
The information provided in this article is for general informational purposes only. It does not constitute financial, investment, or legal advice. Readers are advised to consult with professional advisors before making any investment decisions. The author and publisher are not responsible for any losses or damages resulting from the use of this information.
