Demand for Independent Directors rises amid IPO rush

According to a report by ET Intelligence Bureau rising stock market has led to higher demand for Independent Directors. Independent Directors (ID) are in high demand because of the surge in companies preparing for IPOs amid the market rally.

According to Prime Database, 166 companies listed in the past three fiscal years have collectively appointed 513 Independent Directors in the two years leading up to their IPOs. For example, Zomato appointed five IDs in 2021 before its July IPO, while Doms Industries appointed four in July 2023 ahead of its December IPO. Similarly, Bharti Hexacom appointed three IDs last December before its April IPO.

Listing regulations require most listed companies to have at least six Directors, with half being non-executive, including one Woman Independent Director. One-third of the Audit Committee and its Chairperson must be independent. Medium to small companies gearing up for listing usually look for one female and two male Independent Directors.