BSE Sets Sights On Slashing SME IPO Timelines With AI‑Powered DRHP Pre‑Checks

The Bombay Stock Exchange (BSE) is shaking things up for small and medium-sized enterprises (SMEs) looking to go public. It has rolled out a new AI-powered tool that pre-checks Draft Red Herring Prospectuses (DRHPs), aiming to significantly speed up the listing process.

Instead of taking several days to vet a DRHP, this AI system can flag issues in just 30 to 40 minutes. That's a massive time-saver for merchant bankers and SMEs eager to hit the markets faster.

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How This AI Works

Under a pilot program, merchant bankers can upload draft documents to a secure folder maintained by the BSE SME platform. The AI scans these drafts, cross-checks them against SEBI's regulations and the exchange's own rules, and then spits out a report. This report highlights any compliance issues or missing info, giving teams a chance to fix them before the formal review.

Think of it like an intelligent assistant for early-stage paperwork. It won't replace the full BSE review, but it catches problems early, kind of like a spell-checker, but for regulatory compliance.

Why It Matters: Cutting Down a Lengthy Process

Until now, the process of transitioning from DRHP filing to approval has often taken 60 to 90 days. Even with simplified templates, it was still slow. The introduction of AI is expected to change that significantly.

One industry expert at a FICCI conference said it best: while rights issues and QIPs have gotten faster, IPOs were still stuck in the slow lane. This AI tool might be the accelerator they needed.

This move aligns perfectly with a broader trend of digitising India's capital markets. SEBI, the market regulator, has also made significant changes, like introducing public comment periods and profitability rules for SME IPOs. They're even exploring AI themselves to speed up mainboard IPO reviews.

What Is In It For SMEs and Investors

• Faster timelines: SMEs can launch their IPOs sooner, respond better to market trends, and avoid months of delay.
• Lower costs: Less time means fewer legal and banking fees, which is great news for businesses on tight budgets.
• Fewer hiccups: The AI identifies issues early, resulting in less back-and-forth with regulators.
• Investor trust: Clearer, more consistent disclosures make investors, especially institutions, more confident in SME offerings.

SEBI officials have noted that new rules, such as public comment windows and stricter fund usage policies, are part of a broader push toward transparency and governance. Tech tools, they say, only strengthen this shift. Of course, success depends on whether merchant bankers actually use the tool. BSE plans to bring several dozen firms on board during the pilot phase, with full rollout planned by late 2025.

There are still concerns. The AI needs to be smart enough to catch industry-specific risks, like related-party transactions or circular trading. BSE states that it's working on fine-tuning the system using real-world data and feedback from human reviewers.

Looking Forward

BSE and SEBI don't plan to stop here. The idea is to weave AI into the entire IPO lifecycle, from the moment a company decides to raise capital right through to post-listing oversight. That could mean better tracking of how IPO funds are used, spotting accounting red flags early, and ensuring cleaner financials across the board.

BSE's new AI tool could completely transform the process of SME IPOs in India. If it works as expected, companies might go from submitting a DRHP to ringing the opening bell in under two months.

That's not just faster than before, it's potentially more rapid than anywhere else in the world. For India's growing SME sector, that's a significant development.